-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FCymNfbtndmk4I9oGPWxdol8suyrVI/lWyTYti9unoH+rf9IoU3lMFlBTJdyYeDZ h2unLkRBS1l6WLL3o6YpCg== 0000950123-01-508751.txt : 20020411 0000950123-01-508751.hdr.sgml : 20020411 ACCESSION NUMBER: 0000950123-01-508751 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 20011121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORAL ASIA PACIFIC SATELLITE HK LTD CENTRAL INDEX KEY: 0001162312 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521611027 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-73600-01 FILM NUMBER: 1798348 BUSINESS ADDRESS: STREET 1: C/O LORAL SPACECOM CORP STREET 2: 600 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORAL CYBERSTAR INC CENTRAL INDEX KEY: 0001029850 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 522008654 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-73600 FILM NUMBER: 1798347 BUSINESS ADDRESS: STREET 1: 2440 RESEARCH BLVD STE 400 CITY: ROCKVILLE STATE: MD ZIP: 20850 BUSINESS PHONE: 3012588101 MAIL ADDRESS: STREET 1: 2440 RESEARCH BLVD STREET 2: SUITE 400 CITY: ROCKVILLE STATE: MD ZIP: 20850 FORMER COMPANY: FORMER CONFORMED NAME: LORAL ORION INC DATE OF NAME CHANGE: 19990809 FORMER COMPANY: FORMER CONFORMED NAME: ORION NETWORK SYSTEMS INC/NEW/ DATE OF NAME CHANGE: 19970404 FORMER COMPANY: FORMER CONFORMED NAME: ORION NEWCO SERVICES INC DATE OF NAME CHANGE: 19961231 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORAL SPACE & COMMUNICATIONS LTD CENTRAL INDEX KEY: 0001006269 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 133867424 STATE OF INCORPORATION: D0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-73600-02 FILM NUMBER: 1798349 BUSINESS ADDRESS: STREET 1: 600 THIRD AVE STREET 2: C/O LORAL SPACECOM CORP CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 MAIL ADDRESS: STREET 1: 600 THIRD AVE STREET 2: C/O LORAL SPACECOM CORP CITY: NEW YORK STATE: NY ZIP: 10016 S-4/A 1 y54595a1s-4a.txt AMENDMENT NO. 1 TO FORM S-4:LORAL CYBERSTAR ETAL AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 2001 REGISTRATION STATEMENT NO. 333-73600. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- LORAL CYBERSTAR, INC.(*) (Exact name of registrant as specified in its charter) DELAWARE 3663 52-1564318 (Primary Standard Industrial (I.R.S. Employer Identification (State or other jurisdiction of Classification Number) incorporation or organization) Code Number)
--------------------- 2440 RESEARCH BOULEVARD SUITE 400 ROCKVILLE, MARYLAND 20850 (301) 258-8101 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) LORAL SPACE & COMMUNICATIONS LTD. (Exact name of registrant as specified in its charter) BERMUDA 3663 13-3867424 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification incorporation or organization) Classification Code Number) Number)
--------------------- C/O LORAL SPACECOM CORPORATION 600 THIRD AVENUE NEW YORK, NY 10016 (212) 697-1105 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------------- AVI KATZ, ESQ. 600 THIRD AVENUE NEW YORK, NY 10016 (212) 697-1105 (Address, including zip code, and telephone number, including area code, of agent for service) --------------------- WITH COPIES TO: BRUCE R. KRAUS, ESQ. WILLKIE FARR & GALLAGHER 787 SEVENTH AVENUE NEW YORK, NEW YORK 10019 (212) 728-8000 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] ---------- If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ---------- If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ---------- --------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- *ADDITIONAL REGISTRANT
PRIMARY STANDARD STATE OR OTHER INDUSTRIAL I.R.S. JURISDICTION CLASSIFICATION EMPLOYEE OF INCORPORATION CODE IDENTIFICATION NAME OF ADDITIONAL REGISTRANT OR FORMATION NUMBER NUMBER ----------------------------- ---------------- -------------- -------------- Loral Asia Pacific Satellite(HK) Limited Hong Kong 3663 52-1611027
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION DATED NOVEMBER 21, 2001 PROSPECTUS AND CONSENT SOLICITATION LORAL CYBERSTAR, INC. OFFER TO EXCHANGE LORAL CYBERSTAR'S 10% SENIOR NOTES DUE 2006 GUARANTEED BY LORAL SPACE & COMMUNICATIONS LTD. AND WARRANTS TO PURCHASE UP TO 6,657,096 SHARES OF COMMON STOCK OF LORAL SPACE & COMMUNICATIONS LTD. FOR LORAL CYBERSTAR'S OUTSTANDING 11 1/4% SENIOR NOTES DUE 2007 AND 12 1/2% SENIOR DISCOUNT NOTES DUE 2007 For every $1,000 principal amount of 11 1/4% Senior Notes, plus accrued and unpaid interest as of October 15, 2001, tendered and accepted for exchange, you will receive: - $750.247 principal amount of our 10% Senior Notes due 2006 guaranteed by Loral Space & Communications Ltd. and our existing and future restricted subsidiaries; and - warrants to purchase 7.40 shares of common stock of Loral Space. For every $1,000 principal amount at maturity of 12 1/2% Senior Discount Notes tendered and accepted for exchange, you will receive: - $707.935 principal amount of our 10% Senior Notes due 2006 guaranteed by Loral Space and our existing and future restricted subsidiaries; and - warrants to purchase 6.98 shares of common stock of Loral Space. The warrants will be exercisable for five years at an exercise price equal to 110% of the average of the daily volume-weighted average trading prices of Loral Space common stock on the New York Stock Exchange, as reported by Bloomberg, L.P., for the ten consecutive trading days preceding the second trading day before the closing of the exchange offer. We have established a toll free telephone number you can call beginning 12 trading days prior to the closing of the exchange offer to learn the approximate exercise price of the warrants computed as of the preceding trading day and, on and after the second trading day preceding the closing, the actual warrant exercise price. The number is (877) 485-2033. By tendering your notes, you will be automatically consenting to proposed amendments to the indenture governing your notes that will remove substantially all of the operating restrictions and events of default contained therein. Therefore, the existing notes not tendered and remaining outstanding after the exchange offer will not have the benefit of those covenants and events of default. The new notes, however, will be issued under an indenture containing covenants and events of default substantially similar to those contained in the existing indentures. New notes will be issued in denominations of $1,000 and integral multiples of $1,000. At the closing of the exchange offer, instead of issuing new notes in a denomination other than an integral multiple of $1,000, we will issue to holders tendering notes with an aggregate principal amount of $500,000 or more cash in the amount of any amount exceeding the next lowest integral multiple of $1,000. Holders tendering notes with a lesser aggregate principal amount will receive new notes with an aggregate principal amount rounded down to the nearest integral multiple of $1,000. The number of Loral Space warrants to be issued in the exchange offer will be rounded up to the nearest full warrant. The exchange offer and consent solicitation will expire 12:00 midnight, New York City time, on December 20, 2001, unless we extend it. Tenders of notes may be withdrawn any time prior to 12:00 midnight on the expiration date. As of October 15, 2001, the sum of the aggregate principal amount of the senior notes and the aggregate accreted value of the senior discount notes outstanding was $912.5 million. Our offer to exchange your notes is conditioned upon receiving tenders of notes that represent at least 85% of this aggregate amount. Under a lock-up agreement, holders of 49.04% of the aggregate principal amount of the senior notes and 51.43% of the aggregate principal amount at maturity of the senior discount notes have already agreed to tender their notes. Currently, Loral SpaceCom Corporation, a subsidiary of Loral Space, holds a $79.7 million note payable on demand, which ranks equally with all of our unsubordinated indebtedness. In connection with the completion of the exchange offer, Loral SpaceCom will cancel the existing note, and we will transfer our data services business to Loral SpaceCom and issue a new $29.7 million subordinated note due 2006 to Loral SpaceCom, which note will be guaranteed on a subordinated basis by Loral Space and our existing and future restricted subsidiaries. We will make no separate payment, other than the exchange consideration for your existing notes, for consents delivered in the consent solicitation. The new notes that we will issue to you and the warrants Loral Space will issue to you in exchange for your existing notes are new securities with no established trading market and will not be listed on any securities exchange or market. We expect the new notes will be eligible for trading in the PORTAL market. If all the conditions to this exchange offer are satisfied, we will exchange all existing notes that are validly tendered and not validly withdrawn. We will not receive any proceeds from the exchange offer. The exchange of notes will be considered a recapitalization with boot for United States federal income tax purposes. Consequently, all or the major portion of any loss realized will not be recognized for tax purposes and all or a portion of any gain realized will be recognized and will be subject to income tax. Loral Space's common stock is traded on the New York Stock Exchange under the symbol "LOR". --------------------- CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 25 OF THIS PROSPECTUS. --------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR THE WARRANTS TO BE DISTRIBUTED IN THE EXCHANGE OFFER, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Lead Dealer Manager for the Exchange Offer and Lead Solicitation Agent for the Consent Solicitation is: DRESDNER KLEINWORT WASSERSTEIN Co-Dealer Managers for the Exchange Offer and Co-Solicitation Agents for the Consent Solicitation are: BANC OF AMERICA SECURITIES LLC JPMORGAN LEHMAN BROTHERS The date of this prospectus and consent solicitation is November , 2001. The exchange offer and consent solicitation are not being made to, nor will we accept tenders for exchange from, holders of existing notes in any jurisdiction in which the exchange offer and consent solicitation or the acceptance of them would not be in compliance with the securities or blue sky laws of such jurisdiction TABLE OF CONTENTS
PAGE ---- SUMMARY..................................................... 1 RISK FACTORS................................................ 25 FORWARD-LOOKING STATEMENTS.................................. 38 DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES FOR LORAL CYBERSTAR........................................... 38 DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES AND RATIO OF EARNINGS TO COVER FIXED CHARGES FOR LORAL SPACE........... 38 USE OF PROCEEDS............................................. 38 CAPITALIZATION.............................................. 39 THE EXCHANGE OFFER.......................................... 42 DESCRIPTION OF THE NEW NOTES................................ 56 DESCRIPTION OF LORAL SPACE GUARANTY......................... 88 DESCRIPTION OF THE LORAL SPACE WARRANTS..................... 115 THE PROPOSED AMENDMENTS..................................... 117 FEDERAL INCOME TAX CONSEQUENCES............................. 129 FOREIGN ISSUER CONSIDERATIONS............................... 133 BERMUDA TAX CONSIDERATIONS.................................. 134 LEGAL MATTERS............................................... 134 EXPERTS..................................................... 135 WHERE YOU CAN FIND MORE INFORMATION......................... 135 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 136 INDEX TO FINANCIAL STATEMENTS............................... F-1
NOTICE TO CALIFORNIA RESIDENTS ONLY With respect to a holder of existing notes residing in California, unless the new notes and the subsidiary guarantee of the new notes are qualified for sale by the California Department of Corporations, this exchange offer is being made to such holder only if such holder is: - a bank, savings and loan association, trust company, insurance company, investment company registered under the Investment Company Act of 1940, pension or profit-sharing trust (other than a pension or profit-sharing trust of the issuer, a self-employed individual retirement plan, or individual retirement account), in each case, within the meaning of Section 25102(i) of the California Corporate Securities Law of 1968, - any organization described in Section 501(c)(3) of the Internal Revenue Code, as amended on December 29, 1981, which has total assets (including endowment, annuity and life income funds) of not less than $5,000,000 according to its most recent audited financial statements, as described in Rule 260.102.10(a) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968, or - any corporation which has a net worth on a consolidated basis according to its most recent audited financial statements of not less than $14,000,000, as described in Rule 260.102.10(b) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968, i whether such holder is acting for itself or as trustee, provided that such holder represents that it is purchasing for its own account (or for the trust account) for investment and not with a view to or for sale in connection with any distribution of the security. NOTICE TO ALL RECIPIENTS This prospectus does not constitute an offer to sell these securities or a solicitation of an offer to buy these securities in any state where such solicitation, offer or sale is not permitted. Please refer to the Letter of Transmittal and the other ancillary documents relating to this prospectus for instructions relating to your eligibility to tender in the exchange offer. ii SUMMARY The following is a brief summary of the information that is included in this prospectus. This summary may not contain all the information that may be important to you. You should read the entire prospectus, including the financial data and related notes contained in this prospectus, and the financial statements and reports incorporated by reference in this prospectus, before making an investment decision. The terms "Loral CyberStar," "the company," "we," "us" and "our" as used in this prospectus refer to "Loral CyberStar, Inc." and its subsidiaries as a combined entity, except where it is made clear that such term means only Loral CyberStar. The term "Loral Space" as used in this prospectus refers to "Loral Space & Communications Ltd." and its subsidiaries as a combined entity, except where it is made clear that such term means only Loral Space. Throughout this prospectus, we refer to our 11 1/4% Senior Notes due 2007 and our 12 1/2% Senior Discount Notes due 2007 as "senior notes" and "senior discount notes," respectively, and as the "existing notes," collectively. Our reference to the existing notes means the senior notes and the senior discount notes as governed by their respective indentures until the execution of their respective supplemental indentures, after which, the existing notes means the senior notes and the senior discount notes as governed by their respective indentures, each as amended by its respective supplemental indenture. We refer to our 10% Senior Notes due 2006 as "new notes." We refer to the "new notes," the guaranty by Loral Space, or the "Loral Space guaranty," the guaranty of our restricted subsidiaries, and warrants to purchase shares of common stock of Loral Space or the "Loral Space warrants" collectively as the "exchange consideration." THE EXCHANGE OFFER We are offering to exchange: - up to $332.4 million in the aggregate of new 10% Senior Notes due 2006 issued by us and guaranteed by Loral Space and our existing and future restricted subsidiaries, and warrants to purchase up to 3,277,848 shares of common stock of Loral Space for our outstanding $443 million 11 1/4% Senior Notes due 2007; and - up to $342.6 million in the aggregate of new 10% Senior Notes due 2006 issued by us and guaranteed by Loral Space and our existing and future restricted subsidiaries, and warrants to purchase up to 3,379,248 shares of common stock of Loral Space for our outstanding $484 million 12 1/2% Senior Discount Notes due 2007. We are also soliciting consents with respect to our existing notes on the terms and conditions described in this prospectus. For every $1,000 principal amount of senior notes, plus accrued and unpaid interest as of October 15, 2001, tendered and accepted for exchange, you will receive: - $750.247 principal amount of our new notes; and - warrants to purchase 7.40 shares of common stock of Loral Space. For every $1,000 principal amount at maturity of senior discount notes tendered and accepted for exchange, you will receive: - $707.935 principal amount of our new notes; and - warrants to purchase 6.98 shares of common stock of Loral Space. The warrants will be exercisable for five years at an exercise price equal to 110% of the average of the daily volume-weighted average trading prices of Loral Space common stock on the New York Stock Exchange, as reported by Bloomberg, L.P., for the ten consecutive trading days preceding the second trading day before the closing of the exchange offer. We have established a toll-free telephone number you can call beginning 12 trading days prior to the closing of the exchange offer to learn the approximate exercise price of the warrants computed as of the preceding day and, on and after the second trading day preceding the closing, the actual warrant exercise price. The number is (877) 485-2033. The recorded message on this telephone number will be updated each day during the 10 trading day period with the average computed exercise price of the warrants through the previous night. During the two trading days before the closing of the exchange offer, the recorded message will state the actual warrant exercise price. We encourage you to call this telephone number. Please be aware, however, that during the 10 trading day period preceding the two trading days prior to the closing, the estimated exercise price of the warrants, as provided in this recorded message, necessarily will be different from the actual exercise price of the warrants to be issued in connection with the exchange offer. The actual exercise price of the warrants to be issued in connection with the exchange offer will not be determined until two trading days prior to the closing of the exchange offer. The new notes issued by us will have terms and conditions substantially similar to the terms of the existing notes except that the covenants in the new notes indenture with respect to the incurrence of debt and the granting of liens will be more restrictive in some respects than existing covenants in the senior notes indenture and the senior discount notes indenture. We will continue to have rights to use our cash flow to construct or acquire a replacement satellite and to incur secured indebtedness to construct or acquire a replacement satellite for Telstar 11. On October 15, 2001, we, along with Loral Space and Loral SpaceCom Corporation, entered into a lock-up agreement with holders of existing notes representing 49.04% of the aggregate principal amount of the senior notes and 51.43% of the aggregate principal amount at maturity of the senior discount notes in which we agreed to make this exchange offer and those holders agreed to tender their existing notes and consent to the amendments of the existing indentures in exchange for the same exchange consideration as described in this prospectus. Our offer to exchange the existing notes is conditioned upon the tender of existing notes that represent at least 85% of the sum of the aggregate principal amount of the senior notes and the aggregate accreted value of the senior discount notes as of October 15, 2001. Currently, Loral SpaceCom, a subsidiary of Loral Space, holds a $79.7 million note payable on demand, which ranks equally with all of our unsubordinated indebtedness. In connection with the completion of the exchange offer, Loral SpaceCom will cancel the existing note, and we will transfer our data services business to Loral SpaceCom and issue a new $29.7 million subordinated note due 2006 to Loral SpaceCom, having an interest rate of 10% per annum payable at maturity, subordinated to our new 10% senior notes and guaranteed on a subordinated basis by Loral Space and our existing and future restricted subsidiaries. Certain of our subsidiaries owning portions of the data services business that are guarantors of the existing notes will be transferred to Loral SpaceCom Corporation as part of the transfer. To the extent permitted by the indentures for the existing notes, such subsidiaries will be released from their obligations under their guarantees of the existing notes. To the extent they are not released from their obligations under their guarantees of the existing notes, we will indemnify them against any liabilities incurred by any of them as a result of any payments made under such guarantees. For the nine months ended September 30, 2001 and for the year ended December 31, 2000, EBITDA of the data services business was a loss of $14.4 million and a loss of $14.8 million and capital expenditures were $4.3 million and $24.4 million, respectively. Book value of the net assets for the data services business was approximately $40 million at September 30, 2001. You should read the discussion under the headings "The Exchange Offer," "Description of the New Notes," "Description of Loral Space Guaranty" and "Description of the Loral Space Warrants" for further information regarding the new notes, the Loral Space guaranty and the Loral Space warrants. THE CONSENT SOLICITATION By properly tendering your existing notes, you will also be consenting to the proposed amendments to the senior notes indenture and the senior discount notes indenture, as the case may be, to eliminate substantially all of the covenants and events of default that may be removed by majority consent of the holders consistent with the applicable indentures and the requirements of the Trust Indenture Act of 1939, as amended. 2 The proposed amendments, which will apply to any senior notes and senior discount notes not tendered in the exchange offer, include, but are not limited to, removing restrictions on our ability to: - incur indebtedness; - make dividend payments; - sell capital stock of our subsidiaries; - enter into transactions with shareholders and affiliates; - incur liens; - enter into sale-leaseback transactions; - sell assets; - consolidate and/or merge; and - transfer our existing business. The proposed amendments also remove requirements in connection with: - repurchasing notes on a change of control; - paying taxes and other claims; - maintaining property and insurance coverage; and - providing SEC reports to holders. In addition, the proposed amendments will defer (rather than waive) contribution and other rights available to subsidiary guarantors of the existing notes and will remove certain events of default, including but not limited, to: - a default by us on other indebtedness; - final judgments or orders not paid or discharged; and - bankruptcy, insolvency or liquidation. If you withdraw your tender of existing notes, your consent to the proposed amendments will also be deemed withdrawn. You may not withdraw your consent without withdrawing your tender of existing notes. The consent of holders of a majority of the aggregate principal amount of the senior notes or of the senior discount notes, as the case may be, is required to effect the proposed amendments to the applicable existing indenture. WE WILL MAKE NO SEPARATE PAYMENT, OTHER THAN THE EXCHANGE CONSIDERATION IN EXCHANGE FOR THE EXISTING NOTES, FOR CONSENTS DELIVERED IN THE CONSENT SOLICITATION WHICH IS PART OF THE EXCHANGE OFFER. EFFECT OF THE EXCHANGE OFFER AND CONSENT SOLICITATION ON HOLDERS OF EXISTING NOTES WHO DO NOT TENDER If the proposed amendments become effective and you did not tender your existing notes in the exchange offer, you will be bound by the proposed amendments to the senior notes indenture or the senior discount notes indenture, as the case may be, even though you did not consent. You will continue to be entitled to receive principal and interest payments on your existing notes and all other remaining rights conferred by the senior notes indenture, as amended, or the senior discount notes indenture, as amended, as the case may be. See "The Proposed Amendments" for a description of the proposed amendments to the senior notes indenture and the senior discount notes indenture. If you do not tender your existing notes in the exchange offer, you will not be entitled to receive the exchange consideration that includes new notes guaranteed by Loral Space and warrants to purchase shares of common stock of Loral Space. 3 LORAL CYBERSTAR We own and operate three geosynchronous satellites through which we provide fixed satellite services, including video distribution and other satellite transmission services. We also provide data services including managed data services and Internet services. Upon consummation of the exchange offer and consent solicitation, we will transfer our data services business to Loral SpaceCom, as described above. Telstar 11 Telstar 11, formerly known as Orion 1, is a high power satellite with 48 Ku-band transponders (all references to transponders are in 36 MHz equivalents), which commenced operations in January 1995, and provides coverage in North America as far west as Phoenix and Denver and in Europe as far east as Istanbul and Kiev. Telstar 11 was launched in October 1999 into 37.5 degrees W.L. Telstar 12 Telstar 12, formerly known as Orion 2, is a high power satellite with 57 Ku-band transponders, which commenced operations in January 2000 and expanded our European coverage and extended coverage to portions of Russia, Latin America, the Middle East and South Africa. Telstar 12 was launched in October 1999 into 15 degrees W.L. Telstar 12 was originally intended to operate at 12 degrees W.L., but as part of an international coordination process, we agreed with a competing claimant, Eutelsat, to operate Telstar 12 at 15 degrees W.L. and permit Eutelsat to use 12.5 degrees W.L. In return, Eutelsat agreed to leave its 14.8 degrees W.L. orbital slot empty and to assert its priority rights at that location on our behalf. We also agreed to provide to Eutelsat four 54 MHz transponders on Telstar 12 for the life of the satellite at no charge, while retaining risk of loss. In addition, Eutelsat has the right to acquire, at cost, four transponders on the next replacement satellite for Telstar 12. As part of an international coordination process, we continue to conduct discussions with various administrations regarding Telstar 12's operations at 15 degrees W.L. If these discussions are not successful, Telstar 12's useable capacity may be reduced. Telstar 10/Apstar IIR Telstar 10/Apstar IIR, formerly known as Apstar IIR, is a high power satellite on which we have purchased the right to use 28 C-Band and 24 Ku-band transponders for the full remaining useful life of the satellite. Apstar IIR commenced operations in December 1997 at 76.5 degrees E.L. and covers portions of Asia, Europe, Africa and Australia, accounting for more than 75% of the world's population. We purchased all of Apstar IIR's transponder capacity (other than a single, reserved C-band transponder) from APT Satellite Company in September 1999 to replace our Orion 3 satellite, which was lost in a launch failure in May 1999. Insurance proceeds from the launch failure covered most of the $273 million purchase price. APT has also given us the right to lease replacement satellites at this orbital location at the end of the satellite's useful life. Loral Skynet Agreements We and Loral Skynet, a division of Loral SpaceCom, entered into agreements effective January 1, 1999, whereby Loral Skynet provides to us: - marketing and sales of satellite capacity services on our satellite network and related billing and administration of customer contracts for those services, and - telemetry, tracking and control services for our satellite network. We are charged Loral Skynet's costs for providing these services plus a 5 percent administrative fee. 4 Following the exchange offer, we expect to enter into a management agreement with Loral SpaceCom pursuant to which we will be charged an allocation of certain of Loral SpaceCom's corporate overhead expenses, at an anticipated rate of approximately $3 million to $4 million annually. If implemented, this fee will represent additional costs that we will incur. Orion's Indebtedness Prior to our acquisition by Loral Space in 1998, we were known as Orion Network Systems. Orion issued the existing notes in 1997. These obligations are not guaranteed by Loral Space or any subsidiaries of Loral Space. As a result of our obligations under the existing notes, we have continued to file reports with the SEC even though the capital stock of Orion ceased to be publicly traded following our acquisition. LORAL SPACE & COMMUNICATIONS LTD. Loral Space is one of the world's leading satellite communications companies with substantial activities in satellite manufacturing and satellite-based communications services. Loral Space is organized into three operating businesses: fixed satellite services, satellite manufacturing and technology, and data services. Fixed Satellite Services or FSS: Loral Space leases transponder capacity to customers for various applications, including broadcasting, news gathering, internet access and transmission, private voice and data networks, business television, distance learning and direct-to-home television. Loral Space operates its business through wholly owned subsidiaries and divisions including Loral Skynet, Loral CyberStar and Loral Skynet do Brasil Ltda. and joint ventures such as Satelites Mexicanos, S.A. de C.V. and Europe*Star Limited; Satellite Manufacturing and Technology: Loral Space designs and manufactures satellites and space systems and develops satellite technology for a broad variety of customers and applications through Space Systems/Loral, Inc. or SS/L; and Data Services: Loral Space provides managed communications networks and Internet and intranet services through us and delivers high-speed broadband data communications and business television and infomedia services through us and CyberStar, L.P. In addition, a subsidiary of Loral Space acts as the managing general partner of Globalstar, L.P., which owns and operates a global telecommunications network based upon a 52-satellite constellation. Globalstar is financially troubled and is currently attempting to restructure its financial obligations and develop a financial strategy to allow it to continue operations. Loral Space, through its interests in various joint ventures, continues to participate in and to fund its share of the operations of Globalstar service providers in Brazil, Canada, Mexico and Russia. Loral Space regularly engages in discussions with telecommunications service providers, equipment manufacturers and others about possible strategic transactions and alliances, including participation in the Loral Global Alliance and strategic relationships involving its satellite manufacturing operations, which could involve business combinations. PRINCIPAL EXECUTIVE OFFICES Our executive offices are located at 2440 Research Boulevard, Suite 400, Rockville, Maryland 20850, telephone number (301) 258-8101 and Loral Space's executive offices are located at c/o Loral SpaceCom Corporation, 600 Third Avenue, New York, NY 10016, telephone number (212) 697-1105. 5 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER AND CONSENT SOLICITATION Company....................... Loral CyberStar, Inc. Securities Offered............ We are offering up to $675 million in aggregate principal amount of our 10% Senior Notes due 2006 guaranteed by Loral Space and all existing and future restricted subsidiaries and warrants to purchase up to 6,657,096 shares of common stock of Loral Space in exchange for all of our outstanding 11 1/4% Senior Notes due 2007 and our 12 1/2% Senior Discount Notes due 2007. The Exchange Offer............ We are offering to exchange: - $750.247 principal amount of new notes for each $1,000 principal amount of your senior notes, plus accrued and unpaid interest as of October 15, 2001; and - $707.935 principal amount of new notes for each $1,000 principal amount at maturity of your senior discount notes. In addition, - for every $1,000 principal amount of senior notes you tender, you will receive warrants to purchase 7.40 shares of common stock of Loral Space; and - for every $1,000 principal amount at maturity of senior discount notes you tender, you will receive warrants to purchase 6.98 shares of common stock of Loral Space. The warrants will be exercisable for five years at an exercise price equal to 110% of the average of the daily volume-weighted average trading prices of Loral Space common stock on the New York Stock Exchange, as reported by Bloomberg, L.P., for the ten consecutive trading days preceding the second trading day before the closing of the exchange offer. New notes will be issued in denominations of $1,000 and integral multiples of $1,000. At the closing of the exchange offer, instead of issuing new notes in a denomination other than an integral multiple of $1,000, we will issue to holders tendering notes with an aggregate principal amount of $500,000 or more cash in the amount of any amount exceeding the next lowest integral multiple of $1,000. Holders tendering notes with a lesser aggregate principal amount will receive new notes with an aggregate principal amount rounded down to the nearest integral multiple of $1,000. The number of Loral Space warrants to be issued in the exchange offer will be rounded up to the nearest full warrant. In order to be exchanged, an existing note must be properly tendered and accepted. If all the conditions to this exchange offer are satisfied, all existing notes which are validly tendered and not validly withdrawn will be exchanged. We will issue new notes promptly after expiration of the exchange offer. As of October 15, 2001, there were $443 million in aggregate principal amount of senior notes and $484 million in aggregate principal 6 amount at maturity of senior discount notes with an accreted value of $469.5 million. Proposed Amendments to the Indentures.................... In order for your tender of existing notes to be considered valid and, as such, to be accepted by us, you must deliver a consent to the proposed amendments to the senior notes indenture or the senior discount notes indenture, as the case may be. The amendments will remove from the indentures substantially all of the operating covenants and the events of default that currently limit, for the benefit of the holders, our ability to engage in some activities. See "The Exchange Offer -- The Consent Solicitation" and "The Proposed Amendments." Minimum Condition to the Exchange Offer................ As of October 15, 2001, the sum of the aggregate principal amount of the senior notes and the aggregate accreted value of the senior discount notes was $912.5 million. The exchange offer is subject to certain conditions including, among other things, receiving tenders of notes that represent at least 85% of this aggregate amount. Under a lock-up agreement, holders of 49.04% of the aggregate principal amount of the senior notes and 51.43% of the aggregate principal amount at maturity of the senior discount notes have already agreed to tender their notes in the exchange offer and to consent to the proposed amendments, subject to various conditions. See "The Exchange Offer -- Conditions to the Exchange Offer." Expiration Date; Withdrawal of Tender........................ The exchange offer and consent solicitation will expire at 12:00 midnight, New York City time, on December 20, 2001, or such later date and time to which we extend it. A tender of the existing notes pursuant to the exchange offer may be withdrawn at any time prior to 12:00 midnight, New York City time, on the expiration date. Withdrawal of tendered existing notes will be deemed to be a revocation of the consent to the proposed amendments to the indentures. If we elect to provide a subsequent offering period of three to 20 business days after the initial offering period has expired, you will not be entitled to any withdrawal rights during the extension period. Any existing notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer or, in the case of existing notes tendered by book-entry transfer, into the exchange agent's account at The Depository Trust Company. Interest on the New Notes..... The new notes will bear interest at the rate of 10% per annum from October 15, 2001, payable semiannually in arrears on January 15 and July 15 of each year in cash, commencing July 15, 2002, to the person in whose name the new note is registered at the close of business on the preceding January 1 or July 1, as the case may be. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 7 Interest on the Existing Notes Accepted for Exchange......... We will not make any payment with respect to accrued and unpaid interest on the senior notes validly tendered and accepted for exchange. Termination of the Exchange Offer......................... We may terminate the exchange offer if we determine that our ability to proceed with the exchange offer could be materially impaired due to, among other things, any legal or governmental action, new law, statute, rule or regulation or any interpretation of the staff of the SEC of any existing law, statute, rule or regulation. Procedures for Tendering Existing Notes................ If you wish to accept the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a photocopy or facsimile of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must also mail or otherwise deliver the letter of transmittal, or a photocopy or facsimile of the letter of transmittal, together with the existing notes and any other required documents to the exchange agent at the address on the cover page of the letter of transmittal. If you hold the existing notes through DTC and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC, by which you will agree to be bound by the letter of transmittal. Special Procedures for Beneficial Owners............. If you are the beneficial owner of existing notes and your name does not appear on a security position listing of DTC as the holder of such notes, or if you are a beneficial owner of existing notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender such notes in the exchange offer, you should promptly contact the person in whose name your existing notes are registered and instruct such person to tender on your behalf. If you wish to tender on your own behalf you must, prior to executing the letter of transmittal and delivering your existing notes, either make appropriate arrangements to register ownership of the existing notes in your name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Guaranteed Delivery Procedure..................... If you wish to tender your existing notes and your existing notes are not immediately available or you cannot deliver your existing notes, the letter of transmittal or any other documents required by the letter of transmittal or comply with the applicable procedures under DTC's Automated Tender Offer Program prior to the expiration date, you must tender your existing notes according to the guaranteed delivery procedures set forth in this prospectus under "The Exchange Offer -- Guaranteed Delivery Procedure." 8 Acceptance of Existing Notes and Delivery of New Notes..... Subject to certain conditions, we will accept for exchange any and all outstanding notes which are properly tendered in the exchange offer prior to 12:00 midnight, New York City time, on the expiration date. The new notes issued in the exchange offer will be delivered promptly following the expiration date. Accounting Treatment of the Exchange Offer................ Under U.S. generally accepted accounting principles applicable to debt restructurings, we will record the new notes for financial reporting purposes at a carrying value substantially in excess of their actual principal amount. In addition, we will recognize a gain on the exchange only to the extent that the historic carrying value reduced by the value of the warrants issued in the exchange exceeds the sum of the actual principal amount of the new notes and the amount of future interest payments on that amount. As a result, we will not record interest expense on the new notes, even though cash interest will be payable on them. Certain United States Federal Income Tax Considerations..... By accepting the exchange offer, you and we have agreed to treat the transaction for U.S. federal income tax purposes as an exchange of your existing Loral CyberStar notes for new Loral CyberStar notes and Loral Space warrants. We intend to treat this exchange for tax purposes as a recapitalization of Loral CyberStar with boot. In a recapitalization, all or a major portion of any loss realized in the exchange will not be recognized for tax purposes. Any excess of your federal tax basis in your existing notes over your amount realized in the recapitalization will be bond premium that is amortizable over the term of your new notes. For purposes of computing gain or loss realized, unpaid interest and original issue discount that accrued during the period you held existing notes will be treated as a separate item of property. Some portion of any gain realized will be recognized. Your gain realized will be the excess, if any, of the amount you realize over your tax basis in your existing notes. We expect that the amount realized in the transaction will be the face amount of the new notes you receive plus the fair market value of the Loral Space warrants you receive. The portion of your gain that is recognized may be the greater of the fair market value of the Loral Space warrants or the amount of market discount, if any, that accrued during the period you held your existing notes. The gain recognized will be ordinary income to the extent of any accrued market discount. Your tax consequences may be different from those described if the new notes are not classified as securities for tax purposes or if the existing or new notes become publicly traded for tax purposes. You may wish to consult your own tax advisor to determine the federal, state, local, foreign and other tax consequences of the exchange offer. See "Federal Income Tax Consequences." 9 Use of Proceeds............... We will not receive any proceeds from the issuance of the new notes or the Loral Space warrants pursuant to the exchange offer. We and Loral Space will pay all expenses incident to the exchange offer. Dealer Managers and Solicitation Agents........... Dresdner Kleinwort Wasserstein, Inc. is serving as lead dealer manager and lead solicitation agent in connection with the exchange offer and consent solicitation. Banc of America Securities LLC, J.P. Morgan Securities Inc. and Lehman Brothers Inc. are serving as co-dealer managers and as co-solicitation agents in connection with the exchange offer and consent solicitation. You can find the addresses and telephone numbers for the dealer managers and solicitation agents on the back cover of this prospectus. Exchange Agent................ Bankers Trust Company is serving as exchange agent in connection with the exchange offer. All tenders of notes and requests for additional copies of the letter of transmittal should be directed to the exchange agent at the following address: BT Services Tennessee, Inc., Reorganization Unit, P.O. Box 292737, Nashville, TN 37229-2737. For more information with respect to the exchange offer, the telephone number for the exchange agent is (800) 735-7777 and the facsimile number for the exchange agent is (615) 835-3701. Information Agent............. Morrow & Co., Inc. is serving as information agent in connection with the exchange offer. Questions, requests for assistance and requests for additional copies of this prospectus and consent solicitation should be directed to the information agent by calling (800) 607-0088. International noteholders should call (212) 754-8000 collect. Banks and brokerage firms should call (800) 654-2468. Warrant Agent................. The Bank of New York is serving as warrant agent in connection with the exchange offer. For more information with respect to the issuance of the Loral Space warrants, the telephone number for the warrant agent is (212) 896-7202, the facsimile number is (212) 896-7298, and the address is 101 Barclay Street, Floor 21 West, New York, NY 10286. SUMMARY DESCRIPTION OF THE NEW NOTES Securities Offered............ Up to $675 million aggregate principal amount of 10% Senior Notes due 2006. Issuer........................ Loral CyberStar, Inc. Maturity Date................. July 15, 2006. Interest Rate................. 10% per annum. Interest on the new notes will accrue from October 15, 2001 and will be payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2002. Parent Guarantor.............. Loral Space & Communications Ltd. 10 Parent Guaranty............... Loral Space will guaranty our obligations under the new notes, including the payment of principal and interest on a direct, unsecured and senior basis. See "Description of Loral Space Guaranty." Subsidiary Guarantor.......... Loral Asia Pacific Satellite (HK) Limited and all future restricted subsidiaries. Subsidiary Guaranty........... Loral Asia Pacific Satellite (HK) Limited and all future restricted subsidiaries will guaranty our obligation under the new notes including the payment of principal and interest on a direct, unsecured and senior basis. Optional Redemption........... We may redeem the new notes at any time upon the payment of a make whole premium, calculated using a discount rate of 0.50% plus the rate on treasuries with a comparable maturity. In addition, at any time, we may redeem up to $100 million aggregate principal amount of new notes solely out of "excess cash flow" at a redemption price equal to 101% of the principal amount of the new notes being redeemed. See "Description of the New Notes -- Optional Redemption." Ranking....................... The new notes: - will be our direct, unsecured and senior obligations; - will be equal in right of payment with any existing and future unsubordinated indebtedness we incur; - will be senior in right of payment to all of our existing and future subordinated indebtedness, including the $29.7 million subordinated intercompany note issued to Loral SpaceCom in connection with this exchange offer; and - will be effectively senior in right of payment, in so far as our own assets are concerned, to all indebtedness and liabilities, including trade payables, of Loral Space, Loral SpaceCom and Loral Satellite, Inc. The parent guaranty: - will be a direct, unsecured and senior obligation of Loral Space; - will be equal in right of payment with any existing and future unsubordinated indebtedness Loral Space incurs, including its indebtedness under its 9 1/2% Senior Notes due 2006; - will be senior in right of payment to all of Loral Space's existing and future subordinated indebtedness, including its subordinated guaranty of the $29.7 million subordinated intercompany note issued by us to Loral SpaceCom in connection with this exchange offer; and - will be effectively junior in right of payment to all indebtedness and liabilities, including trade payables, of Loral Space's subsidiaries, including Loral SpaceCom and Loral Satellite. 11 The subsidiary guaranty: - will be a direct, unsecured and senior obligation of each subsidiary guarantor; - will be equal in right of payment with any existing and future unsubordinated indebtedness each subsidiary guarantor incurs; and - will be senior in right of payment to all of the subsidiary guarantor's existing and future subordinated indebtedness, including each subsidiary guarantor's subordinated guaranty of the $29.7 million subordinated intercompany note issued to Loral SpaceCom in connection with this exchange offer. See "Description of the New Notes -- General." Market for the New Notes; Listing....................... Although we expect the new notes will be eligible for trading in the PORTAL market, there is no public market for the new notes, and we do not intend to apply for listing of the new notes on any national securities exchange or for quotation through Nasdaq. Accordingly, there can be no assurance as to the development or liquidity of any market for the new notes. Change of Control............. If an event treated as a change of control under the new notes indenture occurs, each holder of new notes will have the right to require us to purchase all or any part of such holder's new notes at a purchase price in cash equal to 101% of the principal amount of the new notes, plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the New Notes -- Repurchase of New Notes Upon a Change of Control." We may not be able to fund these repurchase obligations in the event of a change of control. Covenants..................... The indenture under which we will issue the new notes contains covenants substantially similar to those covenants in the indentures relating to the existing notes except that it will impose more limitations on our ability and the ability of our restricted subsidiaries to incur additional indebtedness and to grant some types of liens. We will continue to have rights to use our cash flow to construct or acquire a replacement satellite and to incur secured indebtedness to construct or acquire a replacement satellite for Telstar 11. See "Description of the New Notes -- Covenants." SUMMARY DESCRIPTION OF THE LORAL SPACE WARRANTS Warrants Offered.............. Warrants to purchase up to 6,657,096 shares of common stock of Loral Space. See "Description of the Loral Space Warrants." For every $1,000 principal amount of senior notes you tender, you will receive warrants to purchase 7.40 shares of common stock of Loral Space. For every $1,000 principal amount at maturity of senior discount notes you tender, you will receive warrants to purchase 6.98 shares of common stock of Loral Space. 12 Exercise...................... The warrants will be exercisable for five years at an exercise price equal to 110% of the average of the daily volume-weighted average trading prices of Loral Space common stock on the New York Stock Exchange, as reported by Bloomberg, L.P., for the ten consecutive trading days preceding the second trading day before the closing of the exchange offer. The Loral Space warrants will be immediately exercisable and will expire on the fifth anniversary of the closing of the exchange offer. We have established a toll-free telephone number you can call beginning 12 trading days prior to the closing of the exchange offer to learn the approximate exercise price of the warrants computed as of the preceding trading day and, on and after the second trading day preceding the closing, the actual warrant exercise price. The number is (877) 485-2033. See "Description of the Loral Space Warrants." Registration Rights........... We will use our commercially reasonable efforts to maintain the effectiveness of a registration statement with respect to the issuance of the Loral Space warrant shares until the earlier of the fifth anniversary of the exchange date and the date all Loral Space warrants issued in the exchange offer have been exercised. MARKETS AND MARKET PRICES Loral Space's common stock is traded on the New York Stock Exchange under the symbol "LOR". The following table shows the intra-day high and low sales prices for the Loral Space common stock as reported by the NYSE for the periods indicated.
HIGH LOW ------ ------ CALENDAR YEAR 1999 First Quarter............................................. $22.44 $14.44 Second Quarter............................................ 20.75 14.38 Third Quarter............................................. 22.88 16.25 Fourth Quarter............................................ 24.75 13.50 CALENDAR YEAR 2000 First Quarter............................................. $25.75 $ 9.88 Second Quarter............................................ 10.50 6.13 Third Quarter............................................. 8.50 5.00 Fourth Quarter............................................ 6.56 2.69 CALENDAR YEAR 2001 First Quarter............................................. $ 6.34 $ 2.10 Second Quarter............................................ 3.55 1.03 Third Quarter............................................. 2.90 1.25 Fourth Quarter (through November 20, 2001)................ 1.68 1.10
We are a wholly owned subsidiary of Loral Space, and none of our securities are listed on any exchange. RISK FACTORS You should carefully consider the specific factors set forth under "Risk Factors" as well as the other information and data included in this prospectus. For a discussion of factors that should be considered in evaluating the exchange offer and consent solicitation, see "Risk Factors" beginning on page 25. 13 LORAL CYBERSTAR SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA The summary consolidated historical financial data as of and for each of the years in the five-year period ended December 31, 2000, has been derived from our audited consolidated financial statements and related notes. The summary consolidated historical financial data as of and for the nine months ended September 30, 2001 and 2000, has been derived from our unaudited condensed consolidated financial statements for such periods. Our results for the interim periods may not be indicative of our results for the year. The following summary historical consolidated financial data should be read in conjunction with the consolidated financial statements and notes incorporated by reference in this prospectus.
PREDECESSOR COMPANY ------------------------------------ NINE THREE NINE MONTHS ENDED YEAR ENDED MONTHS MONTHS SEPTEMBER 30, DECEMBER 31, ENDED ENDED YEAR ENDED DECEMBER 31, -------------------- --------------------- DECEMBER 31, MARCH 31, ------------------------ 2001(1) 2000(1) 2000(1) 1999(1) 1998(1) 1998(2) 1997 1996 -------- --------- --------- --------- ------------ --------- ----------- ---------- (IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Revenues........... $146,148 $ 126,819 $ 187,190 $ 104,882 $ 64,608 $ 18,790 $ 72,741 $ 41,847 Operating loss..... (17,688) (45,324) (43,492) (62,191) (44,029) (23,639) (43,081) (36,353) Net loss........... (92,349) (110,157) (137,418) (114,175) (79,969) (39,691) (105,740) (27,195) Net loss attributable to common stockholders..... (92,349) (110,157) (137,418) (114,175) (79,969) (38,304) (111,774) (28,565) OTHER DATA: Deficiency of earnings to cover fixed charges.... (91,570) (114,039) (136,288) (145,487) (97,341) (44,300) (116,026) (63,917) CASH FLOW DATA: Provided by (used in) operating activities....... 3,487 (61,920) (49,579) 7,930 11,844 (31,056) (15,789) (11,915) Provided by (used in) investing activities....... (4,331) 565 (15,634) (154,086) (25,457) 14,360 (450,406) (26,413) Provided by (used in) financing activities....... (29,580) 63,706 78,265 134,412 (4,327) 488 504,016 15,405
DECEMBER 31, SEPTEMBER 30, ---------------------------------------------------------- 2001(1) 2000(1) 1999(1) 1998(1) 1997 1996 ------------- ---------- ---------- ---------- -------- -------- BALANCE SHEET DATA: Cash and cash equivalents.......... $ 6,745 $ 37,169 $ 24,117 $ 35,861 $ 70,009 $ 32,188 Restricted and segregated cash(3).......................... -- -- 187,315 72,855 356,890 10,000 Total assets....................... 1,320,583 1,428,949 1,684,287 1,417,504 896,492 358,264 Debt (including current portion)... 1,108,722 1,108,408 1,039,484 933,495 797,077 253,212 Limited Partners' interest in Orion Atlantic(4)...................... -- -- -- -- -- 10,130 Redeemable preferred stock......... -- -- -- -- 76,734 20,902 Total stockholders' equity (deficit)........................ 162,660 255,177 347,404 399,091 (46,849) (436)
- --------------- (1) For accounting purposes, the acquisition of Loral CyberStar by Loral Space was accounted for as of March 31, 1998, using the purchase method. Accordingly, the consolidated balance sheets subsequent to March 31, 1998, reflect the push-down of the purchase price allocations. The purchase price represented $447.7 million in excess of Loral CyberStar's net book value, which was primarily allocated to cost in excess of net assets acquired of the fixed satellite services segment of $620.4 million and a fair value adjustment of $153.4 million to increase the carrying value of Loral CyberStar's senior notes and senior discount notes. In addition, in connection with the acquisition, Loral Space agreed to 14 assume unvested employee stock options, which resulted in a new measurement date and an unearned compensation charge of $4.3 million, which was amortized over the vesting period of the options. As a result of the acquisition, depreciation, amortization and interest charges included in the accompanying summary consolidated statement of operations data for periods subsequent to the three months ending March 31, 1998, are not comparable to those of earlier periods presented. (2) Includes $12.8 million of merger costs associated with the acquisition of Loral CyberStar by Loral Space. (3) Restricted and segregated cash represents amounts to fund interest payments on Loral CyberStar's senior notes and segregated amounts to make payments for satellites and certain related costs and amounts held in escrow related to other satellite agreements. (4) Represents amounts invested by Limited Partners (net of syndication costs related to the investments), adjusted for such Limited Partners' share of net losses. 15 LORAL SPACE SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA The summary consolidated historical financial data as of and for each of the years in the five-year period ended December 31, 2000, has been derived from Loral Space's audited consolidated financial statements and related notes. The summary consolidated historical financial data as of and for the nine months ended September 30, 2001 and 2000 has been derived from Loral Space's unaudited condensed consolidated financial statements for such periods. Loral Space's results for the interim periods may not be indicative of its results for the year. The following summary consolidated historical financial data should be read in conjunction with the consolidated financial statements and notes incorporated by reference in this prospectus.
NINE MONTHS ENDED NINE MONTHS SEPTEMBER 30, YEARS ENDED DECEMBER 31, ENDED --------------------- --------------------------------------------------- DECEMBER 31, 2001 2000 2000(1) 1999(2) 1998(3) 1997(3) 1996(3) --------- --------- ----------- ---------- ---------- ----------- ------------ (IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Revenues................ $ 797,060 $ 934,886 $ 1,224,111 $1,457,720 $1,301,702 $ 1,312,591 $ 5,088 Operating income (loss)................ 3,775 (26,948) (86,086) (62,263) (33,780) 13,552 (12,201) Equity in net loss of affiliates, net of taxes(4).............. (55,708) (290,312) (1,294,910) (177,819) (120,417) (49,037) (4,709) Globalstar related impairment charges, net of taxes.......... -- -- (112,241) -- -- -- -- Net income (loss)....... (165,993) (297,682) (1,469,678) (201,916) (138,798) 40,004 8,877 Preferred dividends and accretion(5).......... (68,780) (51,404) (67,528) (44,728) (46,425) (26,315) -- Net income (loss) applicable to common shareholders.......... (234,773) (349,086) (1,537,206) (246,644) (185,223) 13,689 8,877 Earnings (loss) per share -- basic and diluted............... (0.73) (1.18) (5.20) (0.85) (0.68) 0.06 0.04 Dividends paid per common share.......... -- -- -- -- -- -- -- OTHER DATA: Ratio of earnings to cover fixed charges... -- -- -- -- -- 1.9x 3.7x Deficiency of earnings to cover fixed charges............... $(202,789) $ (52,770) $ (141,453) $ (191,181) $ (132,178) -- -- CASH FLOW DATA: Provided by (used in) operating activities............ 95,137 115,004 258,056 (6,933) 86,795 $ (173,609) $ (3,003) (Used in) investing activities............ (183,050) (209,499) (376,740) (679,005) (555,613) (1,079,411) (1,962) Provided by (used in) equity transactions... (26,718) 362,896 352,415 (24,633) 589,187 (18,097) 602,413 Provided by (used in) financing transactions.......... (98,838) (108,327) (79,551) 403,664 199,856 316,912 583,292
16
DECEMBER 31, SEPTEMBER 30, -------------------------------------------------------------- 2001 2000 1999 1998(3) 1997(3) 1996(3) ------------- ---------- ---------- ---------- ---------- ---------- BALANCE SHEET DATA: Cash and cash equivalents......... $ 180,576 $ 394,045 $ 239,865 $ 546,772 $ 226,547 $1,180,752 Total assets...................... 4,446,697 4,678,318 5,610,421 5,229,215 3,010,447 1,699,326 Debt, including current portion... 2,388,266 2,456,844 1,999,322 1,555,775 435,398 -- Non-current liabilities........... 243,885 251,247 252,052 231,384 230,411 26,834 Convertible preferreds(5)......... -- -- -- -- -- 583,292 Shareholders' equity.............. 1,368,982 1,586,388 2,750,664 2,935,721 1,980,520 1,070,069
- --------------- (1) The results of operations for 2000 includes $77 million of increased costs relating to manufacturing delays and customer contract issues ($46 million after taxes) and Loral Space's share of Globalstar's after-tax impairment charges of $882 million (approximately $1.2 billion on a pre-tax basis), which is included in equity in net loss of affiliates and after-tax impairment charges of $112 million ($125 million pre-tax) relating to Loral Space's investments in and advances to Globalstar service provider partnerships. Equity in net loss of affiliates for the year ended December 31, 2000, includes a $33 million after-tax gain representing Loral Space's share of Satmex's net insurance recovery on the loss of a satellite. (2) The results of operations for 1999 includes a pre-tax charge of $35 million ($21 million after taxes) relating to an agreement reached with a customer to extend the delivery date of a satellite and other modifications to the contract in return for providing transponders on another Loral Space satellite for their remaining lives. (3) On March 20, 1998, Loral Space acquired all of the outstanding stock of Loral CyberStar in exchange for common stock of Loral Space. The 1998 financial information includes Loral CyberStar commencing from April 1, 1998. In 1997, Loral Space increased its ownership in SS/L to 100%; prior to 1997, SS/L was accounted for under the equity method of accounting. On March 14, 1997, Loral Space acquired Loral Skynet from AT&T; Loral Space's financial information includes the results of Loral Skynet from that date. (4) Loral Space's principal affiliates are Globalstar, Satmex since November 17, 1997 and Europe*Star since December 1998. Loral Space also has investments in SkyBridge and other ventures, which are accounted for under the equity method. Loral Space sold its interest in K&F Industries, Inc. in 1997. (5) Loral Space incurred non-cash dividend charges in 2001 of approximately $29 million, which primarily relates to the difference between the value of the common stock issued in exchange offers of its preferred stock and the value of the shares that were issuable under the conversion terms of the preferred stock. The non-cash dividend charges had no impact on Loral Space's total shareholders' equity, as the offset was an increase in common stock and paid-in capital. Convertible preferred equivalent obligations were exchanged for 6% Series C preferred stock and were reclassified to shareholders' equity in 1997 upon approval by Loral Space's shareholders. 17 LORAL CYBERSTAR UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS The following unaudited consolidated pro forma financial statements present the effects of the exchange offer, assuming that all senior notes and senior discount notes due 2007 are exchanged for new senior notes due 2006, and the transfer of Loral CyberStar's data services business to Loral SpaceCom in exchange for the cancellation of the existing $79.7 million note payable to Loral SpaceCom and the issuance of a new $29.7 million subordinated note payable to Loral SpaceCom, as if the exchanges occurred as of the beginning of the respective periods for the unaudited consolidated pro forma statements of operations and other data and as if the exchanges occurred as of September 30, 2001 for the unaudited consolidated pro forma balance sheet. Under U.S. generally accepted accounting principles applicable to debt restructurings, we will record the new notes for financial reporting purposes at a carrying value substantially in excess of their actual principal amount. In addition, we will recognize a gain on the exchange only to the extent that the historic carrying value reduced by the value of the warrants issued in the exchange exceeds the sum of the actual principal amount of the new notes and the amount of future interest payments on that amount. As a result, we will not record interest expense on the new notes, even though cash interest will be payable on them. The carrying value of the existing notes, plus accrued interest, at September 30, 2001 is $1,028 million. Assuming the exchange offer is accepted in full, this $1,028 million carrying value will be reduced by approximately $5 million (the estimated fair value of the warrants issued in the exchange) and by approximately $27 million of the estimated pre-tax gain on the exchange offer before expenses, calculated as described above, resulting in a carrying value for the new notes of approximately $996 million. We will amortize the excess of the resulting carrying value over the actual $675 million principal amount of the new notes over the life of the new notes as a non-cash credit to interest expense. This credit will fully offset the $67.5 million of annual cash interest payable on the new notes, so that we will not record interest expense with respect thereto on our statements of operations. The estimated after-tax gain on the exchange offer of approximately $15 million, net of expenses, is reflected in the unaudited consolidated pro forma balance sheet but has not been reflected in the unaudited consolidated pro forma statements of operations and other data. LORAL CYBERSTAR, INC. UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (IN THOUSANDS)
TRANSFER OF DATA SERVICES EXCHANGE OF BUSINESS SENIOR NOTES PRO FORMA PRO FORMA PRO FORMA AS REPORTED ADJUSTMENTS(1) SUBTOTAL ADJUSTMENTS AS ADJUSTED(2) ------------- -------------- -------- ------------ --------------- Revenues...................... $146,148 $(48,767)(3) $ 97,381 $ -- $ 97,381 Operating expenses: Direct...................... 41,375 (30,027) 11,348 -- 11,348 Sales and marketing......... 15,443 (11,968) 3,475 -- 3,475 Engineering and technical services................. 9,202 (9,202) -- -- -- General and administrative........... 15,079 (11,936) 3,143 -- 3,143 Depreciation and amortization............. 82,737 (15,716) 67,021 -- 67,021 -------- -------- -------- ------- -------- Total operating expenses...... 163,836 (78,849) 84,987 -- 84,987 -------- -------- -------- ------- -------- (Loss) income from operations.................. (17,688) 30,082 12,394 -- 12,394 Interest income............. 945 (832) 113 -- 113 Interest expense............ (75,121) 2,547(4) (72,574) 67,637(5) (4,937) Other income................ 294 (7) 287 -- 287 -------- -------- -------- ------- --------
18
TRANSFER OF DATA SERVICES EXCHANGE OF BUSINESS SENIOR NOTES PRO FORMA PRO FORMA PRO FORMA AS REPORTED ADJUSTMENTS(1) SUBTOTAL ADJUSTMENTS AS ADJUSTED(2) ------------- -------------- -------- ------------ --------------- (Loss) income before income taxes....................... (91,570) 31,790 (59,780) 67,637 7,857 Income tax expense............ (779) 779(7) -- (6,821)(6) (6,821) -------- -------- -------- ------- -------- Net (loss) income............. $(92,349) $ 32,569 $(59,780) $60,816 $ 1,036 ======== ======== ======== ======= ======== OTHER DATA: Deficiency of earnings to cover fixed charges...... $(91,570) -- -- -- $(42,768) EBITDA(8)................... 65,049 -- -- -- 79,415
19 LORAL CYBERSTAR, INC. UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (IN THOUSANDS)
TRANSFER OF EXCHANGE OF DATA SERVICES BUSINESS SENIOR NOTES PRO FORMA PRO FORMA PRO FORMA AS REPORTED ADJUSTMENTS(1) SUBTOTAL ADJUSTMENTS AS ADJUSTED(2) ------------ ---------------------- -------- ------------ -------------- Revenues...................... $ 187,190 $ (77,807)(3) $109,383 $ -- $109,383 Operating expenses: Direct...................... 64,887 (46,634) 18,253 -- 18,253 Sales and marketing......... 25,824 (18,835) 6,989 -- 6,989 Engineering and technical services................. 10,894 (10,894) -- -- -- General and administrative........... 21,344 (19,118) 2,226 -- 2,226 Depreciation and amortization............. 107,733 (17,757) 89,976 -- 89,976 --------- --------- -------- ------- -------- Total operating expenses...... 230,682 (113,238) 117,444 -- 117,444 --------- --------- -------- ------- -------- Loss from operations.......... (43,492) 35,431 (8,061) -- (8,061) Interest income............. 4,157 (1,401) 2,756 -- 2,756 Interest expense............ (97,223) 4,071(4) (93,152) 86,912(5) (6,240) Other income................ 270 15 285 -- 285 --------- --------- -------- ------- -------- Loss before income taxes...... (136,288) 38,116 (98,172) 86,912 (11,260) Income tax expense............ (1,130) 1,130(7) -- (1,487)(6) (1,487) --------- --------- -------- ------- -------- Net loss...................... $(137,418) $ 39,246 $(98,172) $85,425 $(12,747) ========= ========= ======== ======= ======== OTHER DATA: Deficiency of earnings to cover fixed charges...... $(136,288) -- -- -- $(78,760) EBITDA(8)................... 64,241 -- -- -- 81,915
20 LORAL CYBERSTAR, INC. UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET SEPTEMBER 30, 2001 (IN THOUSANDS)
TRANSFER OF DATA SERVICES EXCHANGE OF BUSINESS SENIOR NOTES PRO FORMA PRO FORMA PRO FORMA AS REPORTED ADJUSTMENTS(1) SUBTOTAL ADJUSTMENTS AS ADJUSTED ------------- -------------- ---------- ------------- ------------- Current assets: Cash and cash equivalents.... $ 6,745 $ (1,000) $ 5,745 $ -- $ 5,745 Accounts receivable, net..... 25,987 (10,262) 15,725 -- 15,725 Other current assets......... 6,727 (2,655) 4,072 -- 4,072 Due from Loral companies..... 8,945 (8,693) 252 -- 252 ---------- --------- ---------- -------- ---------- Total current assets........... 48,404 (22,610) 25,794 -- 25,794 Property and equipment, net.... 638,664 (36,403) 602,261 -- 602,261 Costs in excess of net assets acquired..................... 566,079 -- 566,079 -- 566,079 Deferred income taxes.......... 40,966 -- 40,966 (8,133)(9) 32,833 Other assets, net.............. 26,470 (6,732) 19,738 -- 19,738 ---------- --------- ---------- -------- ---------- Total assets................... $1,320,583 $ (65,745) $1,254,838 $ (8,133) $1,246,705 ========== ========= ========== ======== ========== Current liabilities: Current portion of long-term debt...................... $ 2,919 $ (47) $ 2,872 $ -- $ 2,872 Accounts payable............. 6,858 (3,256) 3,602 5,000 8,602 Accrued and other current liabilities............... 13,131 (13,131) -- -- -- Customer deposits............ 5,711 (4,892) 819 -- 819 Deferred revenue............. 6,375 (3,979) 2,396 -- 2,396 Interest payable............. 10,384 (1) 10,383 (10,383) -- Note payable to Loral SpaceCom.................. 79,669 (79,669) -- -- -- Due to Loral companies....... -- -- -- -- -- ---------- --------- ---------- -------- ---------- Total current liabilities...... 125,047 (104,975) 20,072 (5,383) 14,689 Long-term debt(10)............. 1,026,134 -- 1,026,134 (21,854) 1,004,280 Subordinated note payable to Loral SpaceCom............... -- 29,669 29,669 -- 29,669 Deferred revenue............... 2,154 -- 2,154 -- 2,154 Customer deposits.............. 4,588 -- 4,588 -- 4,588 Stockholders' equity: Common stock, $.01 par value..................... -- -- -- -- -- Capital in excess of par value..................... 588,197 7,935(11) 596,132 4,000 600,132 Accumulated deficit.......... (423,911) -- (423,911) 15,104 (408,807) Accumulated other comprehensive (loss) income.................... (1,626) 1,626 -- -- -- ---------- --------- ---------- -------- ---------- Total stockholders' equity..... 162,660 9,561 172,221 19,104 191,325 ---------- --------- ---------- -------- ---------- Total liabilities and stockholders' equity......... $1,320,583 $ (65,745) $1,254,838 $ (8,133) $1,246,705 ========== ========= ========== ======== ==========
21 NOTES TO LORAL CYBERSTAR UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (1) These pro forma adjustments result from the transfer of Loral CyberStar's data services segment to Loral SpaceCom in exchange for the cancellation of the $79.7 million intercompany note payable to Loral SpaceCom and the issuance of a $29.7 million new subordinated note to Loral SpaceCom, which bears interest at 10% per annum, in connection with the exchange offer. The adjustments primarily relate to removing the historical results of operations of the data services business and the related assets and liabilities as of and for the respective periods. (2) The pro forma financial statements do not include the anticipated $3 million to $4 million annual management fee discussed on page 4, which is expected to be implemented following the exchange offer. (3) Includes an adjustment to include intercompany sales from Loral CyberStar's fixed satellite services segment to Loral CyberStar's data services segment of approximately $16 million and $26 million for the nine months ended September 30, 2001 and the year ended December 31, 2000, respectively. (4) Includes an adjustment to reduce interest expense for the cancellation of the existing intercompany note due to Loral SpaceCom and the issuance of the new $29.7 million subordinated note to Loral SpaceCom. The reduction was approximately $3 million and $4 million for the nine months ended September 30, 2001 and the year ended December 31, 2000, respectively. (5) Reflects an adjustment to reduce interest expense on the existing notes to zero in connection with accounting for the exchange of the existing notes and the new notes. (6) Represents income taxes at the statutory rate of 35% after adjusting for the non-deductible amortization of cost in excess of net assets acquired. (7) Amount determined in accordance with the Company's tax sharing agreement. (8)EBITDA (which is equivalent to operating income (loss) before depreciation and amortization, including amortization of unearned compensation) is provided because it is a measure commonly used in the communications industry to analyze companies on the basis of operating performance, leverage and liquidity and is presented to enhance the understanding of Loral CyberStar's operating results. However, EBITDA should not be construed as an alternative to net income as an indicator of a company's operating performance, or cash flow from operations as a measure of a company's liquidity. EBITDA may be calculated differently and, therefore, may not be comparable to similarly titled measures reported by other companies. (9) Represents the tax effect of the gain recognized for book purposes on the exchange. In addition, Loral CyberStar has established a valuation allowance against its net deferred tax assets in the amount of $175 million and $199 million at December 31, 2000 and September 30, 2001, respectively. Upon completion of the exchange, Loral CyberStar will reassess the need for this valuation allowance. Any change to the valuation allowance upon reassessment has not been reflected in the unaudited consolidated pro forma balance sheet. (10) Principal amount at maturity of $927 million as reported and $675 million pro forma as adjusted. (11)Represents the difference between the historical value of the net assets of the data services segment and the negotiated value of the net assets, in connection with transfer of the data services business, which has been presented as a capital contribution by Loral Space to Loral CyberStar. 22 LORAL SPACE UNAUDITED SUMMARY CONSOLIDATED PRO FORMA FINANCIAL INFORMATION The following unaudited summary consolidated pro forma financial information presents the effects of the exchange offer, assuming that all senior notes and senior discount notes due 2007 are exchanged for new notes due 2006, as if the exchange occurred as of the beginning of the respective periods for the statement of operations data and other data and as if the exchanges occurred as of September 30, 2001 for the balance sheet data. Under U.S. generally accepted accounting principles applicable to debt restructurings, Loral Space will record the new notes for financial reporting purposes at a carrying value substantially in excess of their actual principal amount. In addition, Loral Space will recognize a gain on the exchange only to the extent that the historic carrying value reduced by the value of the warrants issued in the exchange exceeds the sum of the actual principal amount of the new notes and the amount of future interest payments on that amount. As a result, Loral Space will not record interest expense on the new notes, even though cash interest will be payable on them. The carrying value of the existing notes, plus accrued interest, at September 30, 2001 is $1,028 million. Assuming the exchange offer is accepted in full, this $1,028 million carrying value will be reduced by approximately $5 million (the estimated fair value of the warrants issued in the exchange) and by approximately $27 million of the estimated pre-tax gain on the exchange offer before expenses, calculated as described above, resulting in a carrying value for the new notes of approximately $996 million. Loral Space will amortize the excess of the resulting carrying value over the actual $675 million principal amount of the new notes over the life of the new notes as a non-cash credit to interest expense. This credit will fully offset the $67.5 million of annual cash interest payable on the new notes, so that Loral Space will not record interest expense with respect thereto on its statements of operations. The estimated after-tax gain on the exchange offer of approximately $15 million, net of expenses, is reflected in the unaudited consolidated pro forma balance sheet but has not been reflected in the unaudited consolidated pro forma statements of operations and other data.
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 2001(1) DECEMBER 31, 2000 --------------------- ------------------------ PRO PRO ACTUAL FORMA(2) ACTUAL FORMA(2) -------- --------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Revenues.................................. $797,060 $797,060 $1,224,111 $1,224,111 Operating income (loss)................... 3,775 3,775 (86,086) (86,086) Interest expense.......................... (141,120) (73,483) (170,836) (83,924) (Loss) income before income taxes, equity in net loss of affiliates, minority interest, Globalstar related charges and cumulative effect of change in accounting principle.................... (117,071) (49,434) (56,843) 30,069 Income tax benefit (expense).............. 7,799 (15,874) (9,375) (39,794) Equity in net loss of affiliates, net of taxes................................... (55,708) (55,708) (1,294,910) (1,294,910) Globalstar related charges, net of taxes................................... -- -- (112,241) (112,241) Net loss.................................. (165,993) (122,029) (1,469,678) (1,413,185) Preferred dividends....................... (68,780) (68,780) (67,528) (67,528) Net loss applicable to common shareholders............................ (234,773) (190,809) (1,537,206) (1,480,713) Loss per share -- basic and diluted....... (0.73) (0.60) (5.20) (5.01) OTHER DATA: Deficiency of earnings to cover fixed charges................................. (202,789) (185,777) (141,453) (122,041) EBITDA(3)................................. 169,842 169,842 130,177 130,177
23
SEPTEMBER 30, 2001 ------------------------ ACTUAL PRO FORMA ---------- ---------- BALANCE SHEET DATA: Total assets................................................ $4,446,697 $4,438,564 Current liabilities......................................... 595,647 590,264 Debt, including current portion............................. 2,388,266 2,366,412 Shareholders' equity........................................ 1,368,982 1,388,086
- --------------- (1) Loral Space incurred non-cash dividend charges in 2001 of approximately $29 million, which primarily relates to the difference between the value of the common stock issued in exchange offers of its preferred stock and the value of the shares that were issuable under the conversion terms of the preferred stock. The non-cash dividend charges had no impact on Loral Space's total shareholders' equity, as the offset was an increase in common stock and paid-in capital. (2) Reflects an adjustment to reduce interest expense on the existing notes to zero in connection with accounting for the exchange of the existing notes and the new notes and the related increase in income tax expense. (3) EBITDA (which is equivalent to operating income (loss) before depreciation and amortization, including amortization of unearned compensation) is provided because it is a measure commonly used in the communications industry to analyze companies on the basis of operating performance, leverage and liquidity and is presented to enhance the understanding of Loral Space's operating results. However, EBITDA should not be construed as an alternative to net income as an indicator of a company's operating performance, or cash flow from operations as a measure of a company's liquidity. EBITDA may be calculated differently and, therefore, may not be comparable to similarly titled measures reported by other companies. 24 RISK FACTORS You should consider carefully the following factors, in addition to the other information contained in this prospectus. RISK FACTORS RELATED TO HOLDERS OF EXISTING NOTES WHO DO NOT TENDER INTO THE EXCHANGE OFFER IF YOU DO NOT TENDER YOUR EXISTING NOTES AND WE COMPLETE THE EXCHANGE OFFER, YOUR RIGHTS UNDER THE SENIOR NOTES INDENTURE OR THE SENIOR DISCOUNT NOTES INDENTURE, AS THE CASE MAY BE, WILL BE SUBSTANTIALLY DIMINISHED. The holders of 50.29% of the outstanding existing notes, including 49.04% of the aggregate principal amount of the senior notes and 51.43% of the aggregate principal amount at maturity of the senior discount notes, have agreed to tender their existing notes in the exchange offer. If you do not exchange your existing notes in the exchange offer and we complete the exchange offer, you will continue to hold your existing notes and be subject to the terms of the senior notes indenture or the senior discount notes indenture, as the case may be, under which the senior notes or the senior discount notes were issued. However, in that event, the senior notes indenture and the senior discount notes indenture, as the case may be, will be amended and supplemented so as to implement the proposed amendments that will remove substantially all of the operating restrictions and events of default that may be removed by majority consent of the holders consistent with the applicable indentures and the requirements of the Trust Indenture Act of 1939, as amended. As a result, you will no longer have the benefit of those covenants and events of default. The supplemental indentures will substantially reduce the covenants with which we would otherwise have to comply under the senior notes indenture and the senior discount notes indenture as more fully described under "The Proposed Amendments." We do not currently intend, nor are we required, to purchase any existing notes not exchanged in the exchange offer. THERE WILL BE A LIMITED TRADING MARKET FOR EXISTING NOTES THAT ARE NOT TENDERED IN THE EXCHANGE OFFER. The trading market for existing notes not tendered in the exchange offer is likely to be significantly more limited than it is at present. Therefore, if your existing notes are not tendered in the exchange offer, it may become more difficult for you to sell or transfer your unexchanged existing notes. This reduction in liquidity may in turn increase the volatility of the market price for the existing notes. We cannot guarantee that the existing notes will continue to be rated after the closing of the exchange offer. If the existing notes cease to be rated, their liquidity will be further reduced. RISK FACTORS RELATED TO THE EXCHANGE OFFER AND CONSENT SOLICITATION WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO PURCHASE THE NEW NOTES UPON A CHANGE OF CONTROL AS REQUIRED BY THE INDENTURE GOVERNING THE NEW NOTES. Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all outstanding new notes at a purchase price of 101% of their principal amount. However, it is possible that we will not have sufficient funds at the time of the change of control to repurchase the notes. BECAUSE OF THE LACK OF A PUBLIC MARKET FOR THE NEW NOTES, YOU MAY BE UNABLE TO RESELL YOUR NEW NOTES. Although the new notes will be eligible for trading in the PORTAL market, they will not be listed on any securities exchange or automated quotations system. An active trading market for the new notes may not develop. In addition, the liquidity of any trading market in the new notes, and any market price quoted for the new notes, may be adversely affected by the changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you may be unable to resell your new notes. 25 YOU MAY BE SUBJECT TO FEDERAL INCOME TAXATION AS A RESULT OF TENDERING YOUR EXISTING NOTES. All or a portion of any gain you realize in exchanging your existing notes in this tender offer will be subject to income tax. THE EXCHANGE RATIOS FOR THIS EXCHANGE OFFER DO NOT REFLECT ANY VALUATION OF THE EXISTING NOTES OR THE NEW NOTES. Our board of directors has made no determination that the exchange ratios represent a fair valuation of either the existing notes or the new notes. We have not obtained a fairness opinion from any financial advisor about the fairness of the exchange ratios to you or to us. If you tender your existing notes you may not receive more value than if you choose to keep them. RISK FACTORS RELATED TO OUR BUSINESS AND OUR OPERATIONS The following risk factors relate to our business and operations after giving effect to the transfer of the data services business to Loral SpaceCom as described in this prospectus. WE HAVE SUBSTANTIAL DEBT. Upon the consummation of the exchange offer, we will have approximately $716 million principal amount of debt if holders of all of the existing notes validly tender and do not withdraw their notes and approximately $754 million principal amount at maturity of debt if holders of 85% of each class of the existing notes tender and do not withdraw their notes. In addition, any of our senior notes and senior discount notes not tendered will remain non-recourse to Loral Space. For the nine months ended September 30, 2001, after giving pro forma effect to the transactions described in this prospectus, we had a deficiency of earnings to cover fixed charges of approximately $43 million. Our ability to meet our debt service obligations will be dependent upon our future performance, including our ability to increase revenues, which will be subject to financial, business, competitive and other factors, including factors beyond our control. We will also be required to make cash interest payments on the existing notes not tendered and the new notes starting in 2002. There can be no assurance that we will be able to achieve the revenue increases, or otherwise generate sufficient cash flow to repay our debt obligations with respect to all of our outstanding indebtedness. OUR DEBT IMPOSES RESTRICTIONS AND OTHERWISE AFFECTS OUR ABILITY TO UNDERTAKE CERTAIN ACTIONS. The indenture relating to the new notes will contain restrictive covenants substantially similar to the covenants in the senior notes indenture and the senior discount notes indenture except that the covenants in the new notes indenture will be more restrictive with respect to the incurrence of debt and the granting of liens. In addition, the level of our indebtedness adversely affects: - our ability to pay expenses and fund capital expenditures, which will be affected by our need to use a substantial amount of our cash flow to service existing indebtedness; - our ability to raise additional debt or equity financing in the future; and - our flexibility in planning for, or reacting to, changes to our business and market conditions. WE HAVE FURTHER FUNDING REQUIREMENTS. We currently anticipate that we will have additional funding requirements beginning in 2003 to fund the cost of construction and launch of a replacement satellite for Telstar 11. We do not have a revolving credit facility. Accordingly, we will need to secure funding from Loral Space or raise additional financing. Sources of additional capital may include public or private debt, equity financings or strategic investments. We may not be able to obtain such financing from Loral Space or from outside sources in the amounts and at the times needed. 26 SATELLITE LAUNCHES ARE SUBJECT TO LAUNCH FAILURES AND AFTER LAUNCH OUR SATELLITES REMAIN VULNERABLE TO IN-ORBIT FAILURE, WHICH MAY RESULT IN UNINSURED LOSSES. Satellite launches are risky, and launch attempts have ended in failure. In May 1999, our Orion 3 satellite experienced a launch failure. Random failure of satellite components may result in damage to or loss of a satellite before the end of its expected life. Satellites are carefully built and tested and have certain redundant systems in case of failure. However, in-orbit failure may result from various causes, including component failure, loss of power or fuel, inability to control positioning of the satellite, solar and other astronomical events, and space debris. Repair of satellites in space is not feasible. Many factors affect the useful lives of satellites, including fuel consumption, the quality of construction, gradual degradation of solar panels and the durability of components. We ordinarily insure against launch and in-orbit failures, but at considerable cost. The cost and the availability of insurance vary depending on market conditions and other factors. Our insurance typically does not cover business interruption, so failures result in uninsured economic losses. Replacement of a lost satellite typically requires up to 24 months from the time a contract is executed until the launch date of the replacement satellite. In November 1995, a component on Telstar 11 malfunctioned, resulting in a 2-hour service interruption. The malfunctioning component supported nine transponders serving the European portion of Telstar 11's footprint. Full service was restored using a back-up component. If that back-up component fails, Telstar 11 would lose a significant amount of usable capacity. Our Telstar 10/Apstar IIR satellite has experienced minor losses of power from its solar arrays. Space Systems/Loral is currently investigating the cause of these failures. Although, to date, Telstar 10/Apstar IIR has not experienced any degradation in performance, there can be no assurance that it will not experience additional power loss that could result in performance degradation, including loss of transponder capacity. In the event of additional power loss, the extent of the performance degradation, if any, will depend on numerous factors, including the amount of the additional power loss, when in the life of Telstar 10/Apstar IIR the loss occurred and the number and type of use being made of transponders then in service. In connection with the renewal of the insurance for our Telstar 10/Apstar IIR satellite in October 2001, the insurance underwriters have excluded losses due to solar array failures, since Telstar 10/Apstar IIR was manufactured by SS/L and has the same solar array configuration as another 1300 class satellite manufactured by SS/L that recently experienced a solar array failure of a different nature. SS/L believes that this failure is an isolated event and does not reflect a systemic problem in either the satellite design or manufacturing process. Accordingly, we do not believe that this anomaly will affect Telstar 10/Apstar IIR. SS/L is currently providing the basis for this conclusion to the insurance underwriters. While we anticipate that this exclusion will be removed upon further review by the insurance underwriters, there can be no assurance that this exclusion will be removed. THE SATELLITE INDUSTRY WILL LIKELY BE FACED WITH SIGNIFICANTLY HIGHER INSURANCE PREMIUMS IN THE FUTURE. We have received preliminary indications that the satellite industry will likely be faced with significantly higher premiums on launch and in-orbit insurance in the future. Any such increase will increase our cost of doing business, and we may not be able to pass on such increased cost to our customers. OUR BUSINESS IS REGULATED, CAUSING UNCERTAINTY AND ADDITIONAL COSTS. Our business is regulated by authorities in many jurisdictions, including the Federal Communications Commission, the International Telecommunication Union and the European Union. As a result, some of the activities which are important to our strategy are beyond our control. Our international service offerings are strategically important activities which are regulated by various government and quasi-government authorities and organizations. Regulatory authorities in the various jurisdictions in which we operate can modify, withdraw or impose charges or conditions upon the licenses which we need, and so increase our cost of doing business. 27 The regulatory process also requires potentially costly negotiations with third parties operating or intending to operate satellites at or near orbital locations where we place our satellites so that the frequencies of the satellites do not interfere. For example, as part of our coordination effort on Telstar 12, we agreed to provide four 54 MHz transponders on Telstar 12 to Eutelsat for the life of the satellite and have retained risk of loss. We also granted Eutelsat the right to acquire, at cost, four transponders on the next replacement satellite for Telstar 12. Moreover, we, as part of this international coordination process, continue to conduct discussions with various administrations regarding Telstar 12's operations at 15 degrees W.L. If these discussions are not successful, Telstar 12's useable capacity may be reduced. We cannot guarantee successful frequency coordination for our satellites. Failure to successfully coordinate our satellites' frequencies or to receive other required regulatory approvals could have a material adverse effect on our financial condition and results of operations. WE HAVE MANY COMPETITORS. We compete for customers and market share. We face competition from companies such as PanAmSat Corporation, SES Global and newly privatized organizations such as Intelstat and Eutelsat. Competition in this market may cause downward price pressures, which may adversely affect our revenue. THERE ARE RISKS IN CONDUCTING BUSINESS INTERNATIONALLY. We conduct business outside the United States, which imposes more risks. We could be harmed financially and operationally by changes in foreign regulations and telecommunications standards, tariffs or taxes and other trade barriers. Customers outside of the developed world could have difficulty in obtaining the U.S. dollars they owe to us, including as a result of exchange controls. Exchange rate fluctuations may adversely affect the ability of our customers to pay us in U.S. dollars. Moreover, if we were to need to pursue legal remedies against our foreign customers and business partners, we may have to sue them abroad, where it could be hard for us to enforce our rights. RISK FACTORS RELATED TO LORAL SPACE'S BUSINESS AND OPERATIONS LORAL SPACE HAS SUBSTANTIAL DEBT AND GUARANTY OBLIGATIONS. Loral Space and its subsidiaries and operating affiliates have a significant amount of outstanding debt and guaranty obligations. As of September 30, 2001: - Loral Space's consolidated total debt was $2.4 billion, of which approximately $647 million is scheduled to mature in 2002. Loral Space expects to refinance this indebtedness in due course. However, there can be no guarantee that it will be able to do so. - Satmex, Loral Space's 49%-owned Mexico affiliate, had total debt of $572 million. In addition, Servicios Corporativos Satelitales, S.A. de C.V., the parent company of Satmex, in which Loral Space has a 65% interest, has an obligation to the government of Mexico with an initial face amount of $125 million which accretes at 6.03% over a seven-year period, expiring in December 2004. Loral Space has agreed to maintain its stock ownership interests in the parent company of Servicios in a trust to collateralize this obligation. The indentures and credit agreements relating to this indebtedness impose restrictions on the ability of Loral Space and its subsidiaries and affiliates to take various actions, which may limit their ability to plan for, or react to, changes in their business and market conditions. These limitations include restrictions on their ability to pay dividends and make capital expenditures or investments. Moreover, certain of these agreements require that excess cashflow and insurance proceeds from certain launch or in-orbit failures be used to prepay debt. Loral Space intends to use its cash and available credit ($246 million at September 30, 2001) to help fund the growth and operation of its businesses. If any of its subsidiaries or affiliates finds itself faced with default, Loral Space may be faced with a choice between providing additional support to that company or accepting the loss of some or all of its investment. Loral Space does not intend to provide any further 28 funding to Globalstar, L.P., which expects to finish 2001 with approximately $45 million of cash, after suspension of debt, interest and dividend payments. THE LORAL SPACE GUARANTY WILL NOT BE SECURED BY ANY ASSETS OF LORAL SPACE AND WILL BE EFFECTIVELY SUBORDINATED TO SUBSTANTIAL OUTSTANDING INDEBTEDNESS AND OTHER LIABILITIES OF LORAL SPACE'S SUBSIDIARIES AND UNCONSOLIDATED AFFILIATES. Loral Space is a holding company which derives substantially all of its revenues from its subsidiaries and unconsolidated affiliates. The Loral Space guaranty is not secured by any assets of Loral Space. Loral Space's indenture governing its 9 1/2% Senior Notes due 2006 permits Loral Space to incur substantial indebtedness, including, without limitation, secured indebtedness, and permits its subsidiaries to incur an unlimited amount of non- recourse indebtedness, which may be used for any purpose. Holders of any secured debt of Loral Space will have claims prior to the claims of the holders of the Loral Space guaranty with respect to the assets securing such debt, and the Loral Space guaranty will be effectively subordinated to all indebtedness and other liabilities and commitments (including trade payables) of Loral Space's subsidiaries and unconsolidated affiliates. The other restrictive covenants contained in the Loral Space indenture contain similarly broad exceptions and qualifications. Loral Space is dependent upon payments from its subsidiaries and unconsolidated affiliates to generate the funds necessary to meet its obligations, including any payment on the Loral Space guaranty. The ability of Loral Space's subsidiaries and its affiliates to make such payments will be subject to, among other things, the availability of sufficient cash at the subsidiary or affiliate level, where distribution to Loral Space may be prohibited by applicable present and future restrictive covenants. At September 30, 2001, Loral SpaceCom, a wholly owned subsidiary of Loral Space which owns both SS/L and Loral Skynet, had secured debt and available credit of approximately $600 million and Loral Satellite, which owns the Telstar 6 and Telstar 7 satellites, had secured debt and available credit of approximately $494 million. These obligations will be structurally senior to the Loral Space guaranty with regard to those assets which constitute substantially all of Loral Space's revenue-producing assets. THE DATA SERVICES BUSINESS, WHICH WILL BE TRANSFERRED BY US TO LORAL SPACECOM, IS SUBJECT TO COMPETITION. Our data services business, which will be transferred to Loral SpaceCom, faces competition not only from other satellite based providers, but also from providers of land-based data communications services, such as cable operators, digital subscriber line, or DSL, providers, wireless local loop providers and traditional telephone service providers. In addition, Loral SpaceCom may face competition in the future from proposed satellite systems, including Teledesic Corporation's proposed system and Hughes' Spaceway's system. The data services business will face continued price pressures from fiber competitors for its internet services. The data services business has been subject to decreasing prices over recent years due to increased competition. This pricing pressure is expected to continue (and may accelerate) for the foreseeable future, particularly if, as expected, capacity continues to increase. The data services business will need to increase the volume of its sales in order to compensate for such price reductions. DUE TO POOR SUBSCRIBER TAKE-UP RATES, GLOBALSTAR IS UNABLE TO PAY ITS DEBT OBLIGATIONS AS THEY BECOME DUE, AND WILL REQUIRE ADDITIONAL FINANCING TO CONTINUE ITS OPERATIONS. DURING 2000, LORAL SPACE RECORDED AFTER-TAX CHARGES OF APPROXIMATELY $1.4 BILLION FOR GLOBALSTAR RELATED ACTIVITIES. In January 2001, Globalstar suspended indefinitely principal and interest payments on its debt and dividend payments on its redeemable preferred partnership interests in order to conserve cash for operations. Globalstar is currently in default under its $500 million credit facility due to Loral Space, its vendor financing facility with QUALCOMM, and $1.45 billion of its senior notes. The aforementioned debt that is currently in default is now subject to immediate acceleration by its holders. Globalstar has retained The Blackstone Group as its financial adviser to assist in evaluating its business plan and 29 developing initiatives, including restructuring its debt, identifying funding opportunities and pursuing other strategic alternatives. As of September 30, 2001, Loral Space's direct and indirect investment in connection with Globalstar related activities included about 39% of Globalstar's common equity, about 27% of its debt, an investment in Globalstar Telecommunications Limited preferred stock and investments in and advances to Globalstar service provider partnerships. During 2000, Loral Space recorded after-tax charges of approximately $1.4 billion related to its investment in and advances in connection with Globalstar related activities, which included its after-tax share of Globalstar's impairment charges of approximately $882 million and after-tax impairment charges of $112 million, resulting from the write-down of investments in and advances to Globalstar service provider partnerships to their estimated fair value. After these charges, Loral Space's investment in Globalstar related activities was approximately $10 million as of September 30, 2001. In addition, Loral Space intends to continue to fund its share of the operations of those Globalstar service provider ventures in which it participates as an equity owner. If Globalstar is unable to effectuate a successful restructuring, Loral Space's remaining investment in Globalstar and any additional investment in Globalstar service providers would be impaired. Globalstar has been discussing its new business plan with its principal creditors with the objective of achieving a negotiated financial restructuring plan. Globalstar has indicated that if these discussions are successful, Globalstar will seek confirmation of the negotiated plan through a voluntary Chapter 11 bankruptcy proceeding. If it is unable to effectuate a restructuring acceptable to its creditors, Globalstar has indicated that it will likely seek protection under the federal bankruptcy laws without a pre-negotiated settlement. Moreover, its creditors may seek to initiate involuntary bankruptcy proceedings against Globalstar. Loral Space's equity interests in Globalstar may be eliminated entirely in any such bankruptcy proceeding, as it might in an out-of-court restructuring. The Globalstar debt obligations Loral Space holds are senior unsecured obligations that rank equally in right of payments with all other Globalstar debt obligations. In other situations in the past, challenges have been initiated seeking subordination or recharacterization of debt held by an affiliate of an issuer. While Loral Space knows of no reason why such a claim would prevail with respect to the debt Loral Space holds in Globalstar, there can be no assurance that such claims will not be made in any restructuring or bankruptcy proceeding involving Globalstar. Moreover, there can be no assurance that actions will not be initiated in a Globalstar bankruptcy proceeding to characterize payments previously made by Globalstar to Loral Space as preferential payments subject to repayment. LORAL SPACE HAS BEEN SUED IN NUMEROUS PURPORTED CLASS ACTIONS BROUGHT BY ITS STOCKHOLDERS AND SECURITY HOLDERS OF GLOBALSTAR TELECOMMUNICATIONS LIMITED AND GLOBALSTAR. Loral Space has been named as a defendant in various lawsuits brought by shareholders of Globalstar Telecommunications Limited alleging controlling person liability in respect of certain statements made by GTL and its representatives. Loral Space shareholders have also initiated various shareholder lawsuits alleging that material misstatements or omissions were made about Loral Space's business and prospects as they relate to Globalstar. While these proceedings are in their early stages, management believes that these matters will not have a material adverse effect on the consolidated financial position or results of operations of Loral Space. Loral Space may also find itself subject to other claims brought by Globalstar creditors and securities holders, who may seek to impose liabilities on Loral Space as a result of its relationship with Globalstar. THE ABILITY OF LORAL SPACE'S SUBSIDIARIES TO PAY DIVIDENDS TO IT OR OTHERWISE SUPPORT ITS OBLIGATIONS IS LIMITED BY THE TERMS OF THEIR DEBT INSTRUMENTS. Loral SpaceCom's credit facility allows dividend payments to Loral Space if cumulative dividend payments do not exceed 50% of its cumulative consolidated net income and the ratio of its funded debt to EBITDA is less than 3.0 to 1.0. For the year ended December 31, 2000, Loral SpaceCom had no capacity under this covenant to pay Loral Space any dividends. Loral Satellite, Inc.'s credit agreement also imposes restrictions on its ability to pay dividends to its parent, which is a wholly owned subsidiary of Loral Space. Such restrictions specify, for instance, that 30 dividends can be paid only after Loral Satellite has made loans to Loral Space in an aggregate principal outstanding amount of $100 million or more. Under the terms of our indenture for the new notes, we will be prevented from paying dividends and are unlikely to pay any dividends in the foreseeable future. IF LORAL SPACE'S BUSINESS PLAN DOES NOT SUCCEED, ITS OPERATIONS MIGHT NOT GENERATE ENOUGH CASH TO PAY ITS OBLIGATIONS. For the nine months ended September 30, 2001, Loral Space had a deficiency of earnings to cover fixed charges of approximately $203 million. In addition to its debt service requirements, its businesses are capital intensive and need substantial investment before returns can be realized. For example, Loral Space will incur significant expenditures to construct and launch new satellites for its fixed satellite services business. Loral Space is subject to substantial financial risks from possible delays or reductions in revenue, unforeseen capital needs or unforeseen expenses. Loral Space's ability to meet its obligations and execute its business plan could depend upon its ability, and that of its operating subsidiaries and affiliates, to raise cash in the capital markets. Loral Space is uncertain whether this source of cash will be available in the future on favorable terms if at all. LAUNCH FAILURES HAVE DELAYED SOME OF LORAL SPACE'S OPERATIONS IN THE PAST AND MAY DO SO AGAIN IN THE FUTURE. Loral Space depends on third parties, in the United States and abroad, to launch its satellites. Satellite launches are risky, and launch attempts have ended in failure. Loral Space ordinarily insures against launch failures, but at considerable cost. The cost and the availability of insurance vary depending on market conditions and the launch vehicle used. Loral Space's insurance typically does not cover business interruption, and so launch failures result in uninsured economic losses. Replacement of a lost satellite typically requires up to 24 months from the time a contract is executed until the launch date of the replacement satellite. AFTER LAUNCH, LORAL SPACE'S SATELLITES REMAIN VULNERABLE TO IN-ORBIT FAILURES, WHICH MAY RESULT IN UNINSURED LOSSES. Failure of satellite components in space may result in damage to or loss of a satellite before the end of its expected life. Satellites are carefully built and tested and have some redundant systems to save the satellite in case of failure. However, in-orbit failure may result from various causes, some random, including component failure, loss of power or fuel, inability to maintain positioning of the satellite, solar and other astronomical events, and space debris. Repair of satellites in space is not feasible. Many factors affect the useful life of Loral Space satellites including fuel consumption, the quality of construction, degradation of solar panels and the durability of components. Although some failures may be covered in part by insurance, they may result in uninsured losses as well. For example, when Loral Skynet experienced the total loss of two satellites in 1994 and 1997 while under AT&T's ownership, it suffered a substantial drop in its profits due to the loss of revenues. THE SATELLITE INDUSTRY WILL LIKELY BE FACED WITH SIGNIFICANTLY HIGHER INSURANCE PREMIUMS IN THE FUTURE. Loral Space has received preliminary indication that the satellite industry will likely be faced with significantly higher premiums on launch and in-orbit insurance in the future. Any such increase will increase the cost of doing business for both Loral Space's satellite manufacturing and fixed satellite services segments, and Loral Space may not be able to pass on such increased cost to its customers. SOME OF THE SATELLITES LORAL SPACE CURRENTLY HAS IN-ORBIT HAVE EXPERIENCED OPERATIONAL PROBLEMS. Twelve of the satellites built by SS/L and launched since 1997, five of which are owned and operated by Loral Space's subsidiaries or affiliates, have experienced minor losses of power from their solar arrays. Although, to date, neither Loral Space nor any of the customers using the affected satellites has experienced any degradation in performance, there can be no assurance that one or more of the affected satellites will not experience additional power loss that could result in performance degradation, including 31 loss of transponder capacity. In the event of additional power loss, the extent of the performance degradation, if any, will depend on numerous factors, including the amount of the additional power loss, the level of redundancy built into the affected satellite's design, when in the life of the affected satellite the loss occurred and the number and type of use being made of transponders then in service. A complete or partial loss of satellites could result in a loss of orbital incentive payments and, in the case of satellites owned by Loral Space subsidiaries and affiliates, a loss of revenues and profits. With respect to satellites under construction and construction of new satellites, based on its investigation of the matter, SS/L has identified and is implementing remedial measures that SS/L believes will prevent newly launched satellites from experiencing similar anomalies. SS/L does not expect that implementation of these measures will cause delays in the launch of satellites under construction or construction of new satellites. Based upon information currently available, including design redundancies to accommodate small power losses and the fact that no pattern has been identified as to the timing or specific location within the solar arrays of the failures, Loral Space believes that this matter will not have a material adverse effect on the consolidated financial position or results of operations of Loral Space. While Loral Space has in the past, consistent with industry practice, typically obtained in-orbit insurance for its satellites, it cannot guarantee that, upon a policy's expiration, it will be able to renew the insurance on terms acceptable to it, especially on satellites that have, or that are part of a family of satellites that have, experienced problems in the past. For example, in connection with the renewal of the insurance for the Telstar 10/Apstar IIR satellite in October 2001, the insurance underwriters have excluded losses due to solar array failures, since Telstar 10/Apstar IIR was manufactured by SS/L and has the same solar array configuration as another 1300 class satellite manufactured by SS/L that recently experienced a solar array failure of a different nature. SS/L believes that this failure is an isolated event and does not reflect a systemic problem in either the satellite design or manufacturing process. Accordingly, Loral Space does not believe that this anomaly will affect Telstar 10/Apstar IIR. SS/L is currently providing the basis for this conclusion to the insurance underwriters. While Loral Space anticipates that this exclusion will be removed upon further review by the insurance underwriters, there can be no assurance that this exclusion will be removed or that future renewals of insurance on other Loral Space satellites will not be subject to a similar exclusion. Moreover, the existing insurance policy for Solidaridad 2 expires in November 2002 and a renewal policy may not insure against in-orbit failure arising from the loss of the satellite's control processor, the same component that failed on Solidaridad 1 and other Hughes satellites. An uninsured loss of a satellite will have a material adverse effect on Loral Space's results of operations and financial position. A loss of transponders on a satellite can also hurt Loral Space. Loral Skynet has in the past entered into prepaid leases and sales contracts relating to transponders on its satellites. Under the terms of these agreements, Loral Skynet continues to operate the satellites which carry the transponders and provides a warranty for a period of 10 to 14 years, in the case of sales contracts, and the lease term, in the case of the prepaid leases. Depending on the contract, Loral Skynet may be required under its prepaid leases and sales contracts to replace transponders which do not meet operating specifications. All customers are entitled to a refund equal to the reimbursement value if there is no replacement. In the case of the sales contracts, the reimbursement value is based on the original purchase price plus an interest factor from the time the payment was received to acceptance of the transponder by the customer, reduced on a straight-line basis over the warranty period. In the case of prepaid leases, the reimbursement value is equal to the unamortized portion of the lease prepayment made by the customer. LORAL SPACE DEPENDS ON SPACE SYSTEMS/LORAL FOR A LARGE PORTION OF REVENUE AND OPERATING INCOME. SS/L has historically generated a significant part of Loral Space's revenue and operating income. SS/L, in turn, has historically derived a large part of its revenue and operating income from a few customers. For example, for the nine months ended September 30, 2001, one of SS/L's customers accounted for about 13% of Loral Space's consolidated revenues. As a result, Loral Space's revenue and operating results would be hurt if completed or canceled contracts are not promptly replaced with new orders. Some of SS/L's customers are start-up companies, and there can be no assurance that these companies will be able to fulfill their payment obligations under their contracts with SS/L. 32 SS/L's accounting for long-term contracts sometimes requires adjustments to profit and loss based on revised estimates during the performance of the contract. These adjustments may have a material effect on Loral Space's results of operations in the period in which they are made. The estimates giving rise to these risks, which are inherent in long-term, fixed-price contracts, include the forecasting of costs and schedules, contract revenues related to contract performance, including revenues from orbital incentives, and the potential for component obsolescence due to procurements long before assembly. SS/L's major contracts fall into two categories: firm fixed-price contracts and cost-plus-award-fee contracts. Under firm fixed-price contracts, work performed and products shipped are paid for at a fixed price without adjustment for actual costs incurred in connection with the contract. While cost savings under these fixed-price contracts would result in gains to SS/L, cost increases would result in losses borne solely by SS/L. The majority of SS/L's contracts are fixed-price contracts. Under such contracts, SS/L may receive progress payments, or it may receive partial payments upon the occurrence of certain program milestones. Under a cost-plus-award-fee contract, the contractor recovers its actual allowable costs incurred and receives a fee consisting of a base amount that is fixed at the inception of the contract (the base amount may be zero) and an award amount that is based on the customer's subjective evaluation of the contractor's performance based on criteria stated in the contract. Many of SS/L's contracts and subcontracts may be terminated at will by the customer or the prime contractor. In the event of a termination at will, SS/L is normally entitled to recover the purchase price for delivered items, reimbursement for allowable costs for work in process and an allowance for profit or an adjustment for loss, depending on whether completion of performance would have resulted in a profit or loss. Such terminations may occur in the future. SS/L MAY FORFEIT PAYMENTS FROM CUSTOMERS DUE TO SATELLITE FAILURES OR LOSSES AFTER LAUNCH OR BE LIABLE FOR PENALTY PAYMENTS UNDER CERTAIN CIRCUMSTANCES, AND THESE LOSSES MAY BE UNINSURED. Some of SS/L's satellite manufacturing contracts provide that some of the total price is payable as "incentive" payments earned over the life of the satellite. SS/L has in the past generally not insured for these payments and in fact may be prohibited from insuring these incentive payments under certain circumstances. Some of SS/L's contracts call for in-orbit delivery, transferring the launch risk to SS/L. SS/L generally insures against that exposure. SS/L records as revenue the present value of incentive payments as the costs associated with these incentive payments are incurred. SS/L generally receives the present value of these incentive payments if there is a launch failure or a failure is caused by customer error. SS/L forfeits these payments, however, if the loss is caused by satellite failure or as a result of its own error. In addition, some of SS/L's contracts provide that SS/L may be liable to a customer for penalty payments under certain circumstances, including upon late delivery. These payments are not insured by SS/L. LORAL SPACE AND SS/L ARE CURRENTLY INVOLVED IN AN ARBITRATION WITH ALCATEL SPACE INDUSTRIES, WHICH MAY RESULT IN A FINDING AGAINST LORAL SPACE AND SS/L AND THE PAYMENT OF DAMAGES TO ALCATEL. SS/L is a party to an Operational Agreement with Alcatel Space Industries ("Alcatel Space") pursuant to which the parties cooperate on certain satellite programs. In addition, pursuant to an Alliance Agreement with SS/L, for so long as it continues to hold at least 81.6% of the Loral Space securities that it acquired in 1997 in exchange for SS/L stock that it previously owned, Alcatel Space has certain rights, including two representatives on SS/L's seven-member board of directors, and certain actions require the approval of its board representatives. Alcatel Space also has certain rights to purchase SS/L shares at fair market value in the event of a change of control (as defined) of either Loral Space or SS/L, including the right to use its Loral Space holdings as part of the SS/L purchase price. These agreements are terminable upon one-year's notice by either party, and SS/L gave the one-year notice to Alcatel Space on February 22, 2001. Alcatel Space filed suit on March 16, 2001 in the United States District Court for the Southern District of New York against Loral Space and SS/L alleging various breaches of the agreements, seeking declaratory and injunctive relief to enforce its rights thereunder and challenging the effectiveness of the termination. On April 26, 2001, the District Court issued its decision (i) granting on consent the 33 Company's motion to compel arbitration and (ii) granting in part Alcatel's motion for a preliminary injunction by requiring that the Company continue to comply with the agreements pending resolution of the arbitration, or the expiration of the agreements, whichever occurs earlier. The District Court also held that the issue of the termination of the agreements is a matter that is to be decided in arbitration, as required by the agreements. The arbitration has commenced. In the arbitration, in addition to challenging the effectiveness of the termination, Alcatel has asserted, and is seeking $300 million in damages in respect of, various alleged breaches of the agreements. Loral Space believes that it will prevail on the termination issue, that it has meritorious defenses to the claimed breaches and that this matter will not have a material adverse effect on the consolidated financial position or results of operations of Loral Space. SS/L IS CURRENTLY INVOLVED IN A DISPUTE WITH PANAMSAT REGARDING A SATELLITE BUILT BY SS/L, WHICH MAY RESULT IN THE PAYMENT OF DAMAGES TO PANAMSAT. In September 2001, the PAS 7 satellite built by SS/L for PanAmSat experienced an electrical power failure on its solar arrays that resulted in the loss of use of certain transponders on the satellite. As a result, PanAmSat has claimed that under its contract with SS/L it is entitled to be paid $16 million. SS/L disputes this claim. SS/L believes that this failure is an isolated event and does not reflect a systemic problem in either the satellite design or manufacturing process. LORAL SPACE IS SUBJECT TO EXPORT CONTROLS, WHICH MAY RESULT IN DELAYS, UNFORESEEN ADDITIONAL COSTS AND UNCERTAINTIES IN CERTAIN MARKETS. Like other exporters of space-related products and services, SS/L needs licenses from the U.S. government when it sells a satellite to a foreign customer or launches abroad. Foreign launches have been politically sensitive because of the relationship between launch technology and missile technology. U.S. government policy has limited, and is likely in the future to limit, launches from the former Soviet Union and China. For example, the U.S. government delayed a Globalstar launch from Kazakhstan by several months when it stopped granting case-by-case approval of launches from that location pending an intergovernmental agreement covering technology security matters. Changes in governmental policies, political leadership or legislation in the United States, Russia, Kazakhstan or China could adversely affect Loral Space's ability to launch from these countries or increase the costs of doing so. The launch of ChinaSat-8 has been delayed pending SS/L's obtaining the approvals required for the launch. On December 23, 1998, the Office of Defense Trade Controls, or ODTC, of the U.S. Department of State temporarily suspended a previously approved technical assistance agreement under which SS/L had been preparing for the launch of the ChinaSat-8 satellite. According to ODTC, the purpose of the temporary suspension was to permit that agency to review the agreement for conformity with then newly-enacted legislation (Section 74 of the Arms Export Control Act) with respect to the export of missile equipment and technology. In addition, SS/L was required to re-apply for new export licenses from the State Department to permit the launch of ChinaSat-8 on a Long March launch vehicle when the old export licenses issued by the Commerce Department, the agency that previously had jurisdiction over satellite licensing, expired in March 2000. On January 4, 2001, the ODTC, while not rejecting these license applications, notified SS/L that they were being returned without action. SS/L and the State Department are now in discussions regarding SS/L's obtaining the approvals required for the launch of ChinaSat-8. In December 1999, SS/L reached an agreement with ChinaSat to extend the date for delivery of the ChinaSat-8 satellite to July 31, 2000. In return for this extension and other modifications to the contract, SS/L provided to ChinaSat two 36 MHz and one 54 MHz transponders on Telstar 10/Apstar IIR for ChinaSat's use for the life of those transponders. As a result, SS/L recorded a charge to earnings of $35 million in 1999. If ChinaSat were to terminate its contract with SS/L as a result of these delays, SS/L may have to refund $134 million in advances received from ChinaSat and may incur penalties of up to $11 million and believes it would incur costs of approximately $38 million to refurbish and retrofit the satellite so that it can be sold to another customer, which resale cannot be guaranteed. To the extent that SS/L is able to recover some or all of its $52 million deposit payment on the Chinese launch vehicle, this recovery would offset a portion of such payments. There can be no assurance, however, that SS/L will be able to 34 either obtain a refund from the launch provider or find a replacement customer for the Chinese launch vehicle. SS/L IS THE TARGET OF A GRAND JURY INVESTIGATION WHICH MAY ADVERSELY AFFECT SS/L'S ABILITY TO EXPORT ITS PRODUCTS. SS/L could be accused of criminal violations of the export control laws arising out of the participation of its employees in a committee formed to review the findings of the Chinese regarding the 1996 crash of a Long March rocket in China. Under the applicable regulations, SS/L could be barred from export privileges without being convicted of any crime if it is merely indicted for these alleged violations, and loss of export privileges would harm SS/L's business. Whether or not SS/L is indicted or convicted, SS/L will remain subject to the State Department's general statutory authority to prohibit exports of satellites and related services if it finds that SS/L has violated the Arms Export Control Act. Further, the State Department can suspend export privileges whenever it determines that grounds for debarment exist and that suspension "is reasonably necessary to protect world peace or the security or foreign policy of the United States." If SS/L were to be indicted and convicted of a criminal violation of the Arms Export Control Act, it would be subject to a fine of $1 million per violation, could be debarred from certain export privileges, and could be debarred from participation in government contracts. Since some of SS/L's satellites are built for foreign customers and/or are launched on foreign rockets, a debarment would seriously harm SS/L's business, which in turn would hurt Loral Space. THE WORLD MARKET SHARE OF U.S. SATELLITE MANUFACTURERS HAS DECLINED, FOLLOWING RECENT CHANGES IN U.S. EXPORT CONTROL POLICIES. SS/L is required to obtain licenses and enter into technical assistance agreements, presently under the jurisdiction of the State Department, in connection with the export of satellites and related equipment, as well as disclosure of technical data to foreign persons. Delays in obtaining the necessary licenses and technical assistance agreements may result in the cancellation of, or delay SS/L's performance on, existing contracts, and, as a result, SS/L may incur penalties or lose incentive payments under these contracts. In the period 1992 through 1999, satellites ordered from the leading U.S. satellite manufacturers, including SS/L, accounted for 79% of all commercial satellite bookings. In 2000, following changes in federal export control regulations, policies and procedures, this percentage dropped to 47%. For bookings by non-U.S. customers in those periods, the corresponding percentages were 21% and 53%, respectively. If these policies do not change, Loral Space's competitors abroad may continue to gain both workflow and additional capabilities and expertise. In such event, it would become increasingly difficult for the U.S. satellite manufacturing industry to recapture this lost market share. SS/L COMPETES WITH LARGE MANUFACTURERS THAT HAVE SIGNIFICANT RESOURCES. In the manufacture of its satellites, Loral Space competes with very large well-capitalized companies, including several of the world's largest, such as The Boeing Company, Lockheed Martin, Alcatel Space Industries and Astrium. These companies have considerable financial resources which they may use to gain advantages in marketing and in technological innovation. SS/L's success depends on its ability to innovate on a cost-effective and timely basis. LORAL SPACE COMPETES FOR MARKET SHARE AND CUSTOMERS; TECHNOLOGICAL DEVELOPMENTS FROM COMPETITORS OR OTHERS MAY REDUCE DEMAND FOR ITS SERVICES. Loral Space faces heavy competition in fixed satellite services from companies such as PanAmSat Corporation, SES Global and newly privatized organizations such as Intelsat and Eutelsat. Competition in this market may lower prices, which may adversely affect Loral Space's results. The data services business also faces competition from providers of land-based data communications services, such as cable operators, digital subscriber line (DSL) providers, wireless local loop providers and traditional telephone service providers. Loral Space cannot assure you that its data services business will attract enough customers either to compete effectively or to implement fully its business plan. 35 As land-based telecommunications services expand, demand for some satellite-based services may be reduced. New technology could render satellite-based services less competitive by satisfying consumer demand in other ways or through the use of incompatible standards. Loral Space also competes for local regulatory approval in places in which both it and a competitor may want to operate. Loral Space also competes for scarce frequency assignments and fixed orbital positions. LORAL SPACE'S BUSINESS IS REGULATED, CAUSING UNCERTAINTY AND ADDITIONAL COSTS. Loral Space's business is regulated by authorities in multiple jurisdictions, including the Federal Communications Commission, the International Telecommunication Union, or ITU, and the European Union. As a result, some of the activities which are important to its strategy are beyond its control. The following are some strategically important activities which are regulated: - the expansion of Loral Skynet's operations beyond the domestic U.S. market; - the international service offered by its data services business operations; - the manufacture, export and launch of satellites; - the expansion of Satmex's Latin American business; and - the implementation of Europe*Star's business plan. Regulatory authorities in the various jurisdictions in which Loral Space operates can modify, withdraw or impose charges or conditions upon the licenses which Loral Space needs, and so increase its costs. The regulatory process also requires potentially costly negotiations with third parties operating or intending to operate satellites at or near orbital locations where Loral Space places its satellites so that the frequencies of those other satellites do not interfere with its own. For example, as part of its coordination effort on Telstar 12, Loral Space agreed to provide four 54 MHz transponders on Telstar 12 to Eutelsat for the life of the satellite and has retained risk of loss with respect to those transponders. Loral Space also granted Eutelsat the right to acquire, at cost, four transponders on the next replacement satellite for Telstar 12. Moreover, as part of this international coordination process, Loral Space continues to conduct discussions with various administrations regarding Telstar 12's operations at 15 degrees W.L. If these discussions are not successful, Telstar 12's useable capacity may be reduced. Loral Space cannot guarantee successful frequency coordination for its satellites. Failure to successfully coordinate Loral Space's satellites' frequencies or to resolve other required regulatory approvals could hurt its consolidated financial position and results of operations. LORAL SPACE FACES RISKS IN CONDUCTING BUSINESS INTERNATIONALLY. For the year ended December 31, 2000, approximately 23% of Loral Space's revenue was generated from customers located outside of the United States. Loral Space could be harmed financially and operationally by changes in foreign regulations and telecommunications standards, tariffs or taxes and other trade barriers. Although almost all of its contracts with foreign customers require payment in U.S. dollars, customers in developing countries could have difficulty in obtaining the U.S. dollars they owe Loral Space, including as a result of exchange controls. Exchange rate fluctuations may adversely affect the ability of Loral Space's customers to pay Loral Space in U.S. dollars. If Loral Space ever needs to pursue legal remedies against its foreign business partners or customers, it may have to sue them abroad, where it could be hard for Loral Space to enforce its rights. LORAL SPACE SHARES CONTROL OF ITS AFFILIATES WITH THIRD PARTIES. Third parties have significant ownership, voting and other rights in many of Loral Space's subsidiaries and affiliates. As a result, Loral Space does not always have full control over management of these entities. The rights of these third parties and fiduciary duties under applicable law could result in others acting or 36 omitting to act in ways which are not in Loral Space's best interest. To the extent that these entities are or become customers of SS/L, these conflicts could become acute. For example: - Primary control of Satmex is vested in Mexican nationals, as required by Mexican law, subject to certain supermajority rights which Loral Space retains. - The Europe*Star joint venture is under control by Alcatel, subject to Loral Space's supermajority rights. - Future joint ventures between Alcatel and Loral Space within the Loral Global Alliance will be controlled by the initiating party, subject to supermajority rights in favor of the non-initiating party. - Alcatel is an investor in CyberStar, LP and has supermajority rights in it. - Although Loral Space is the managing general partner and largest equity owner of Globalstar, its control is limited by important supermajority rights of Globalstar's limited partners, and in light of Globalstar's current financial position, the rights of Globalstar's creditors. LORAL SPACE RELIES ON KEY PERSONNEL. Loral Space needs highly qualified personnel. Except for Mr. Bernard L. Schwartz, its Chairman and Chief Executive Officer, none of Loral Space's officers has an employment contract nor does Loral Space maintain "key man" life insurance. The departure of any of Loral Space's key executives could have an adverse effect on its business. RISK FACTORS RELATED TO LORAL SPACE'S COMMON STOCK THE RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW ARE DIFFERENT FROM RIGHTS OF SHAREHOLDERS UNDER U.S. LAW. Since Loral Space is a Bermuda company, the principles of law that govern shareholder rights, the validity of corporate procedures and other matters are different from those that would apply if Loral Space were a U.S. company. For example, it is not certain whether a Bermuda court would enforce liabilities against Loral Space or its officers and directors based upon United States securities laws either in an original action in Bermuda or under a United States judgment. Bermuda law giving shareholders rights to sue directors is less developed than in the United States and may provide fewer rights. PRICES OF LORAL SPACE'S COMMON STOCK MAY EXPERIENCE SUDDEN CHANGES. Many things that Loral Space cannot predict or control may cause sudden changes in the price of Loral Space's common stock. Risks associated with the deployment and operation of satellite systems, in particular, may cause sudden changes in the price. For example, on September 10, 1998, the day following the loss of twelve Globalstar satellites in Kazakhstan because of a launch failure, the price of Loral Space's common stock fell by 28%. THE MARKET FOR LORAL SPACE'S STOCK COULD BE ADVERSELY AFFECTED BY FUTURE ISSUANCE OF SIGNIFICANT AMOUNTS OF ITS COMMON STOCK. As of September 30, 2001, 334,839,921 shares of Loral Space's common stock were outstanding. In addition, there were 34,600,721 stock options outstanding on such date, of which 15,376,537 were immediately exercisable, warrants outstanding that were exercisable for 194,404 shares of Loral Space's common stock, 9,839,874 shares of Loral Space's Series C Preferred Stock convertible by its terms into 24,599,686 shares of Loral Space's common stock and 6,110,788 shares of Loral Space's Series D Preferred Stock convertible by its terms into 15,407,704 shares of Loral Space's common stock. Sales of significant amounts of Loral Space's common stock to the public, or the perception that those sales could happen, could hurt the price of Loral Space's common stock. On March 31, 2000, Lockheed Martin converted 45,896,978 shares of Loral Space's Series A Preferred Stock into 45,896,978 shares of Loral Space's common stock. Because of the large number of shares involved, sales by Lockheed Martin of all or a substantial part of its position and related hedging transactions could hurt the market for, and the trading prices of, Loral Space's common stock. 37 FORWARD-LOOKING STATEMENTS CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, from time to time, we, Loral Space, our representatives or its representatives have made or may make forward-looking statements, orally or in writing. They can be identified by the use of forward-looking words such as "believes", "expects", "plans", "may", "will", "should", or "anticipates" or their negatives or other variations of these words or other comparable words, or by discussions of strategies that involve risks and uncertainties. Such forward-looking statements may be included in, but are not limited to, various filings made by us or Loral Space with the Securities and Exchange Commission, press releases or oral statements made by or with the approval of an authorized executive officer of ours or Loral Space. Forward-looking statements are only predictions. Actual events or results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions, including, but not limited to, the factors referred to below. We and Loral Space undertake no obligation to update any forward-looking statements. For a discussion identifying some important factors that could cause actual results to vary materially from those anticipated in forward-looking statements, see "Risk Factors." See also "Management's Discussion and Analysis of Financial Condition and Results of Operations" for us and Loral Space which are incorporated by reference in this prospectus. DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES FOR LORAL CYBERSTAR The Deficiency of Earnings to Cover Fixed Charges for each of the periods indicated is as follows (in thousands):
PREDECESSOR COMPANY ----------------------------------- THREE NINE MONTHS YEAR ENDED NINE MONTHS MONTHS YEAR ENDED ENDED SEPTEMBER 30, DECEMBER 31, ENDED ENDED DECEMBER 31, -------------------- --------------------- DECEMBER 31, MARCH 31, -------------------- 2001 2000 2000 1999 1998 1998 1997 1996 -------- --------- --------- --------- ------------ ------------ --------- -------- Deficiency of Earnings to Cover Fixed Charges...... $(91,570) $(114,039) $(136,288) $(145,487) $(97,341) $(44,300) $(116,026) $(63,197)
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES AND RATIO OF EARNINGS TO COVER FIXED CHARGES FOR LORAL SPACE The Deficiency of Earnings to Cover Fixed Charges (in thousands) and Ratio of Earnings to Cover Fixed Charges for each of the periods indicated is as follows:
NINE MONTHS NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED --------------------- ------------------------------------------- DECEMBER 31, 2001 2000 2000 1999 1998 1997 1996 --------- -------- --------- --------- --------- ---- ------------ Deficiency of Earnings to Cover Fixed Charges...... $(202,789) $(52,770) $(141,453) $(191,181) $(132,178) -- -- Ratio of Earnings to Cover Fixed Charges............ -- -- -- -- -- 1.9x 3.7x
USE OF PROCEEDS We and Loral Space will receive no cash proceeds from the issuance of the new notes or the issuance of the warrants, respectively, pursuant to the exchange offer. 38 CAPITALIZATION The following tables set forth Loral Space's and Loral CyberStar's consolidated capitalization as of September 30, 2001, on an actual basis, and as adjusted to give effect to the issuance of the new notes in the exchange offer assuming 100% participation. You should read this table in conjunction with Loral Space's and Loral CyberStar's consolidated financial statements and other financial information presented in Loral Space's Annual Report on Form 10-K, as amended on Form 10-K/A, and Loral CyberStar's Annual Report on Form 10-K for the year ended December 31, 2000, respectively, and their respective Quarterly Reports on Form 10-Q for the quarter ended September 30, 2001, which are incorporated into this prospectus by reference. See "Incorporation of Certain Documents by Reference." CAPITALIZATION OF LORAL CYBERSTAR The following table presents the capitalization of Loral CyberStar on an actual basis and a pro forma basis to give effect to the exchange offer and the transfer of Loral CyberStar's data services business to Loral SpaceCom (including the estimated after tax gain of $15 million, after deducting expenses associated with the exchange offer).
SEPTEMBER 30, 2001 --------------------------- ACTUAL PRO FORMA ---------- ---------- (IN THOUSANDS) Debt, including current portion 10.0% senior notes due 2006 ($675 million principal amount)(1)............................................. -- $ 995,625 11.25% senior notes due 2007 ($443 million principal amount)(2)............................................. $ 490,229 -- 12.50% senior discount notes due 2007 ($484 million principal amount at maturity and accreted principal amount of $467 million)(2)............................. 527,250 -- Note payable to Loral SpaceCom Corporation................ 79,669 29,669 Other(2).................................................. 11,574 11,527 ---------- ---------- Total debt, including current portion (accreted principal amount of $1,001 million actual and $716 million pro forma)................................ 1,108,722 1,036,821 ---------- ---------- Stockholders' equity: Common stock, $.01 par value.............................. -- -- Capital in excess of par value............................ 588,197 600,132 Accumulated deficit....................................... (423,911) (408,807) Accumulated other comprehensive loss...................... (1,626) -- ---------- ---------- Total stockholders' equity........................... 162,660 191,325 ---------- ---------- Total capitalization................................. $1,271,382 $1,228,146 ========== ==========
- --------------- (1) Under U.S. generally accepted accounting principles applicable to debt restructurings, Loral CyberStar will record the new notes for financial reporting purposes at a carrying value substantially in excess of their actual principal amount. In addition, Loral CyberStar will recognize a gain on the exchange only to the extent that the historic carrying value reduced by the value of the warrants issued in the exchange, exceeds the sum of the actual principal amount of the new notes and the amount of future interest payments on that amount. As a result, Loral CyberStar will not record interest expense on the new notes, even though cash interest will be payable on them. (2) In connection with the Loral CyberStar acquisition in March 1998, Loral Space did not assume Loral CyberStar's senior notes, senior discount notes or Loral CyberStar's other debt. Such debt remains outstanding and is non-recourse to Loral Space. The carrying value of Loral CyberStar's senior notes and senior discount notes was increased to reflect a fair value adjustment of $153.4 million based on quoted market prices at the date of acquisition. 39 CAPITALIZATION OF LORAL SPACE The following table presents the capitalization of Loral Space on an actual basis and a pro forma basis to give effect to the exchange offer (including the estimated after tax gain of $15 million, after deducting expenses associated with the exchange offer).
SEPTEMBER 30, 2001 ------------------------- ACTUAL PRO FORMA ----------- ----------- (IN THOUSANDS) Debt, including current portion Recourse debt Term loans(1).......................................... $ 394,000 $ 394,000 Revolving credit facilities(1)......................... 605,000 605,000 9.5% senior notes due 2006............................. 350,000 350,000 10.0% senior notes due 2006 ($675 million principal amount)(2)............................................ -- 995,625 Other.................................................. 10,213 10,213 ----------- ----------- Total recourse debt.................................. 1,359,213 2,354,838 ----------- ----------- Non-recourse debt of Loral CyberStar(3) 11.25% senior notes due 2007 ($443 million principal amount)............................................... 490,229 -- 12.50% senior discount notes due 2007 ($484 million principal amount at maturity and accreted principal amount of $467 million)............................... 527,250 -- Other.................................................. 11,574 11,574 ----------- ----------- Total non-recourse debt.............................. 1,029,053 11,574 ----------- ----------- Total debt, including current portion (accreted principal amount of $2,281 million actual and $2,046 million pro forma).................................. 2,388,266 2,366,412 ----------- ----------- Shareholders' equity: 6% Series C convertible redeemable preferred stock (redemption value $491,994); $.01 par value; 20,000,000 shares authorized, 9,839,874 shares issued and outstanding............................................ 485,371 485,371 6% Series D convertible redeemable preferred stock (redemption value $305,539); $.01 par value; 20,000,000 shares authorized, 6,110,788 shares issued and outstanding............................................ 296,529 296,529 Common stock, $.01 par value; 750,000,000 shares authorized, 333,029,025 shares issued and outstanding............................................ 3,350 3,350 Paid-in capital........................................... 2,762,327 2,766,327 Treasury stock, at cost; 174,195 shares................... (3,360) (3,360) Unearned compensation..................................... (52) (52) Retained deficit.......................................... (2,181,280) (2,166,176) Accumulated other comprehensive income.................... 6,097 6,097 ----------- ----------- Total shareholders' equity........................... 1,368,982 1,388,086 ----------- ----------- Total capitalization................................. $ 3,757,248 $ 3,754,498 =========== ===========
- --------------- (1) Includes debt of Loral Space and its subsidiaries, Loral Satellite, Inc. and Loral SpaceCom Corporation. Loral SpaceCom Corporation has a $600 million credit facility. The facility consists of a $500 million revolving credit facility and a $100 million term loan, and matures in November 2002. Loral Satellite, Inc. has a $494 million credit facility. The facility consists of a $200 million revolving credit facility and a $294 million term loan and matures in August 2003. (2) Under U.S. generally accepted accounting principles applicable to debt restructurings, Loral Space will record the new notes for financial reporting purposes at a carrying value substantially in excess of their actual principal amount. In addition, Loral Space will recognize a gain on the exchange only to the extent that the historic carrying value reduced by the value of the warrants issued in the 40 exchange, exceeds the sum of the actual principal amount of the new notes and the amount of future interest payments on that amount. As a result, Loral Space will not record interest expense on the new notes, even though cash interest will be payable on them. (3) In connection with the Loral CyberStar acquisition in March 1998, Loral Space did not assume Loral CyberStar's senior notes, senior discount notes or Loral CyberStar's other debt. Such debt remains outstanding and is non-recourse to Loral Space. The carrying value of Loral CyberStar's senior notes and senior discount notes was increased to reflect a fair value adjustment of $153.4 million based on quoted market prices at the date of acquisition. 41 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER We are making this exchange offer as part of a plan to reduce and refinance our indebtedness and to create a capital structure that is intended to permit us to finance anticipated obligations with respect to our fixed satellite services business. Currently, Loral SpaceCom, a subsidiary of Loral Space, holds a $79.7 million note payable on demand, which ranks equally with all of our unsubordinated indebtedness. In connection with the completion of the exchange offer, Loral SpaceCom will cancel the existing note, and we will transfer our data services business to Loral SpaceCom and issue a new $29.7 million subordinated note due 2006 to Loral SpaceCom, having an interest rate of 10% per annum payable at maturity, subordinated to the new notes and guaranteed on a subordinated basis by Loral Space and our existing and future restricted subsidiaries. In connection with this transfer, we will indemnify Loral SpaceCom or its assignee from certain liabilities. For the nine months ended September 30, 2001 and for the year ended December 31, 2000, the EBITDA of the data services business was a loss of $14.4 million and a loss of $14.8 million and capital expenditures were $4.3 million and $24.4 million, respectively. The book value of the net assets for the data services business was approximately $40 million at September 30, 2001. This prospectus does not constitute an offer to sell these securities or a solicitation of an offer to buy these securities in any state where such solicitation, offer or sale is not permitted. Please refer to the Letter of Transmittal and the other ancillary documents relating to this prospectus for instructions relating to your eligibility to tender in the exchange offer. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept for exchange any existing notes properly tendered and not withdrawn prior to the expiration date. We are offering to exchange our new notes, the Loral Space guaranty and the Loral Space warrants for the existing notes. You are entitled to exchange in the exchange offer your existing notes for the exchange consideration which consists of the following: (1) new notes issued by us which have terms and conditions substantially similar in most material respects to the terms of the existing notes except that: - the aggregate principal amount will be reduced to a maximum of $675 million; - the interest rate we will pay on the new notes will be 10% per annum; - covenants in the new notes indenture with respect to the incurrence of debt and the granting of liens will be more restrictive in some respects than existing covenants in the senior notes indenture and the senior discount notes indenture; and - we will continue to have rights to use our cash flow to construct or acquire a replacement satellite and to incur secured indebtedness to construct or acquire a replacement satellite for Telstar 11; (2) a Loral Space guaranty of the new notes; (3) a guaranty of the new notes by our Hong Kong subsidiary, Loral Asia Pacific Satellite (HK) Limited, and all of our future restricted subsidiaries; and (4) your pro rata portion of warrants to purchase up to 6,657,096 shares of common stock of Loral Space exercisable for five years after the closing date of the exchange offer at an exercise price equal to 110% of the average of the daily volume-weighted average trading prices of Loral Space common stock on the New York Stock Exchange (as reported by Bloomberg, L.P.) for the ten consecutive trading days preceding the second trading day before the closing of the exchange offer. 42 We have established a toll-free telephone number you can call beginning 12 trading days prior to the closing of the exchange offer to learn the approximate exercise price of the warrants computed as of the preceding day and, on and after the second trading day preceding the closing, the actual warrant exercise price. The number is (877) 485-2033. The recorded message on this telephone number will be updated each day during the 10 trading day period with the average computed exercise price of the warrants through the previous night. During the two trading days before the closing of the exchange offer, the recorded message will state the final exercise price. We encourage you to call this telephone number. Please be aware, however, that during the 10 trading day period preceding the two trading days prior to the closing, the estimated exercise price of the warrants, as provided in this recorded message, will be different from the actual exercise price of the warrants to be issued in connection with the exchange offer. The actual exercise price of the warrants to be issued in connection with the exchange offer will not be determined until two trading days prior to the closing of the exchange offer. In exchange for our outstanding $443 million senior notes plus accrued and unpaid interest as of October 15, 2001, we are offering in the aggregate up to $332.4 million new notes issued by us and guaranteed by Loral Space, the Hong Kong subsidiary and all our future restricted subsidiaries, and warrants to purchase up to 3,277,848 shares of common stock of Loral Space. In exchange for our outstanding $484 million at maturity senior discount notes ($469.5 million aggregate accreted value as of October 15, 2001), we are offering in the aggregate up to $342.6 million new notes issued by us and guaranteed by Loral Space, the Hong Kong subsidiary and all our future restricted subsidiaries, and warrants to purchase up to 3,379,248 shares of common stock of Loral Space. For every $1,000 principal amount of senior notes, plus accrued and unpaid interest as of October 15, 2001, tendered and accepted for exchange, you will receive: - $750.247 principal amount of new notes; and - warrants to purchase 7.40 shares of Loral Space common stock. For every $1,000 principal amount at maturity of senior discount notes tendered and accepted for exchange, you will receive: - $707.935 principal amount of new notes; and - warrants to purchase 6.98 shares of Loral Space common stock. New notes will be issued in denominations of $1,000 and integral multiples of $1,000. At the closing of the exchange offer, instead of issuing new notes in a denomination other than an integral multiple of $1,000, we will issue to holders tendering notes with an aggregate principal amount of $500,000 or more cash in the amount of any amount exceeding the next lowest integral multiple of $1,000. Holders tendering notes with a lesser aggregate principal amount will receive new notes with an aggregate principal amount rounded down to the nearest integral multiple of $1,000. The number of Loral Space warrants to be issued in the exchange offer will be rounded up to the nearest full warrant. The new notes will be issued under and entitled to the benefits of an indenture, to be entered into between us and Bankers Trust Company, as trustee. For a description of the indenture, see "Description of the New Notes." The new notes will bear interest at the rate of 10% per annum from October 15, 2001, payable semiannually in arrears on January 15 and July 15 of each year in cash, commencing July 15, 2002, to the person in whose name the exchange note is registered at the close of business on the preceding January 1 or July 1, as the case may be. Interest will be computed on the basis of a 360-day year of twelve 30-day months. We will not make any payment with respect to accrued and unpaid interest on the existing notes validly tendered and accepted for exchange by us. 43 This prospectus and the letter of transmittal are being sent to all registered holders of existing notes. There will be no fixed record date for determining registered holders of existing notes entitled to participate in the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the lock-up agreement that we, along with Loral Space and Loral SpaceCom, entered into with holders of existing notes representing 49.04% of the aggregate principal amount of the senior notes and 51.43% of the aggregate principal amount at maturity of the senior discount notes, the applicable requirements of the Securities Act, the Exchange Act and the rules and regulations of the SEC. Existing notes that are not tendered in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to receive principal and interest payments and all of the remaining rights conferred by the senior notes indenture, as amended, or the senior discount notes indenture, as amended, as the case may be. See "-- The Consent Solicitation" and, for a description of the proposed amendments to the indentures, see "The Proposed Amendments." We will be deemed to have accepted for exchange properly tendered existing notes when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the new notes from us and delivering the exchange consideration to such holders. Subject to the terms of the agreement among us, Loral Space, Loral SpaceCom and certain holders of the existing notes, we expressly reserve the right to amend or terminate the exchange offer, and not to accept for exchange any existing notes not previously accepted for exchange, upon the occurrence of any of the conditions specified under "-- Conditions to the Exchange Offer." Holders who tender existing notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of existing notes. We will pay all charges and expenses, other than some applicable taxes described below, in connection with the exchange offer. You should read the section entitled "-- Fees and Expenses" for more details regarding fees and expenses incurred in the exchange offer. We will: - distribute a copy of this prospectus to each of the holders of the existing notes; - keep the exchange offer open for at least 20 business days after the date on which the exchange offer is commenced; and - after the expiration of the exchange offer, accept for exchange all existing notes properly tendered and not validly withdrawn. In order to tender your existing notes, you will be required, as a condition to a valid tender, to give your consent to the proposed amendments to the indentures. By properly tendering your existing notes, you will also be consenting to the proposed amendments to the indentures. Furthermore, in order to give your consent to the proposed amendments, you must validly tender, and not validly withdraw, your existing notes. If you withdraw your tender of existing notes, your consent to the amendments will also be deemed withdrawn. If the proposed amendments become effective, each non-exchanging holder of existing notes will be bound by the proposed amendments to the indentures even though the holder did not consent. See "-- The Consent Solicitation" and "The Proposed Amendments" for a description of the proposed amendments to the indentures. THE CONSENT SOLICITATION As part of the exchange offer, we are soliciting consents from the holders of the senior notes and holders of the senior discount notes to the proposed amendments to the indentures governing those notes. The purpose of the proposed amendments is to amend both the senior notes indenture and the senior discount notes indenture to remove substantially all covenants and events of default that may be removed by majority consent of the holders consistent with the indentures and requirements of the Trust Indenture Act, effective upon the closing of the exchange offer. If you withdraw your tender of existing notes, your 44 consent to the proposed amendments will also be deemed withdrawn. If the proposed amendments become effective, each non-exchanging holder of outstanding senior notes or outstanding senior discount notes, as the case may be, will be bound by the proposed amendments to the senior notes indenture and the senior discount notes indenture, respectively, even though the holder did not consent. The proposed amendments, which will apply to any senior notes and senior discount notes not tendered in the exchange offer upon closing of the exchange offer, materially reduce our obligations under the indentures. The proposed amendments include, but are not limited to, removing restrictions on our ability to: - incur indebtedness; - make dividend payments; - sell capital stock of our subsidiaries; - enter into transactions with shareholders and affiliates; - incur liens; - enter into sale-leaseback transactions; - sell assets; - consolidate and/or merge; and - transfer our existing business. The proposed amendments also remove requirements in connection with: - repurchasing notes on a change of control; - paying taxes and other claims; - maintaining property and insurance coverage; and - providing SEC reports to holders. In addition, the proposed amendments will defer (rather than waive) contribution and other rights available to subsidiary guarantors of the existing notes and will remove events of default including but not limited to: - a default by us on other indebtedness; - final judgments or orders not paid or discharged; and - bankruptcy, insolvency or liquidation. The proposed amendments will make certain other conforming and related changes to the indentures. For more information about the proposed amendments, please read the section of this prospectus entitled "The Proposed Amendments." If holders of at least a majority in aggregate principal amount of senior notes have consented to the proposed amendments by tendering their notes, the senior notes indenture will be amended as described in this prospectus at the completion of the exchange offer. If holders of at least a majority in aggregate principal amount at maturity of senior discount notes have consented to the proposed amendments by tendering their notes, the senior discount notes indenture will be amended as described in this prospectus at the completion of the exchange offer. We and the trustee under the indentures will execute a supplemental indenture for each of the senior notes indenture and the senior discount notes indenture after certification to the trustee that the required consents have been received and the satisfaction or waiver of the other conditions to the execution of the supplemental indentures. We will give oral or written notice to the exchange agent of our acceptance and shall be deemed to have accepted for exchange validly tendered existing notes only after such oral or written notice of acceptance has been given to the exchange agent and the supplemental indentures have 45 been executed. If the proposed amendments become effective, each non-exchanging holder of existing notes will be bound by the applicable proposed amendments even though the holder did not consent to the proposed amendments. WE WILL MAKE NO SEPARATE PAYMENT, OTHER THAN THE EXCHANGE CONSIDERATION IN EXCHANGE FOR THE EXISTING NOTES, FOR CONSENTS DELIVERED IN THE CONSENT SOLICITATION WHICH IS PART OF THE EXCHANGE OFFER. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The exchange offer and consent solicitation will expire at 12:00 midnight, New York City time, on December 20, 2001, unless, in our sole discretion, we extend it. If we elect to provide one or more subsequent offering periods totalling between three to 20 business days after the initial offering period has expired, you will not be entitled to any withdrawal rights during the extension period. In accordance with Rule 14e-1 under the Exchange Act, if we elect to increase or decrease the aggregate principal amount of the existing notes sought, the consideration offered or the dealer managers' soliciting fees, the exchange offer will remain open for at least 10 business days from the date that notice of such change is first published or sent or given to holders of the existing notes. As used in this prospectus, the term "expiration date" refers to December 20, 2001. In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify the registered holders of existing notes of the extension no later than 9:00 a.m., New York City time, on the first business day after the previously scheduled expiration date. We reserve the right, in our sole discretion: - to delay accepting for exchange any existing notes; - to extend the exchange offer and consent solicitation or to terminate the exchange offer and consent solicitation and to refuse to accept existing notes not previously accepted if any of the conditions set forth below under "-- Conditions to the Exchange Offer" have not been satisfied or waived by us, by giving oral or written notice of such delay, extension or termination to the exchange agent; or - subject to the terms of the lock-up agreement among us, Loral Space, Loral SpaceCom and certain holders of the existing notes, to amend the terms of the exchange offer in any manner. Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice of such delay to the registered holders of existing notes. If we make a material change in the terms of the exchange offer, consent solicitation or information concerning the exchange offer or consent solicitation or waive any condition of the exchange offer or consent solicitation that results in a material change to the circumstances of the exchange offer or consent solicitation, we will circulate additional exchange offer and consent solicitation materials if and to the extent required by applicable law. In those circumstances, we will also extend the exchange offer and consent solicitation if and to the extent required by applicable law in order to permit holders of the existing notes subject to the exchange offer and consent solicitation adequate time to consider the additional materials. Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we shall have no obligation to publish, advertise or otherwise communicate any public announcement, other than by making a timely release to a financial news service. ACCEPTANCE OF CONSENTS AND EXISTING NOTES, DELIVERY OF NEW NOTES AND LORAL SPACE WARRANTS The acceptance for exchange and payment of existing notes validly tendered and not withdrawn and delivery of new notes and Loral Space warrants in exchange for the tendered existing notes will be made as promptly as practicable after the expiration date of the exchange offer. This acceptance, payment and delivery will be made only upon the terms and subject to the conditions of the exchange offer, the consent solicitation, the terms and conditions of any extension or amendment and applicable law. For purposes of the exchange offer, we will be deemed to have accepted for exchange validly tendered existing notes, if, as 46 and when we give oral or written notice of acceptance to the exchange agent. For purposes of the consent solicitation, consents received by the exchange agent will be deemed to have been accepted when we have accepted the tendered existing notes underlying those consents for exchange in the exchange offer. Subject to the following paragraph and the other terms and conditions of the exchange offer and consent solicitation, delivery of new notes and Loral Space warrants for existing notes accepted pursuant to the exchange offer will be made by the exchange agent as soon as practicable after receipt of such notice. The exchange agent will act as agent for tendering holders for the purposes of transmitting to them new notes and Loral Space warrants. We will return any tendered existing notes not accepted for exchange without expense to the tendering holder as promptly as practicable following the expiration date of the exchange offer. Notwithstanding any other provision described in this prospectus, delivery of exchange consideration for existing notes accepted for exchange pursuant to the exchange offer will in all cases be made only after timely receipt by the exchange agent of: - certificates for, or a timely book-entry confirmation with respect to, the existing notes; - a letter of transmittal, properly completed and validly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message; and - any other documents or payments required by the letter of transmittal and the instructions to the letter of transmittal. Holders tendering pursuant to the procedures for guaranteed delivery discussed under "-- Guaranteed Delivery Procedures" whose certificates for notes or book-entry confirmation with respect to notes are actually received by the exchange agent after the expiration date may be paid later than other tendering holders. All tendering holders, by execution of the letter of transmittal, waive any right to receive notice of acceptance of their notes for exchange. CONDITIONS TO THE EXCHANGE OFFER As of October 15, 2001, the sum of the aggregate principal amount of the senior notes outstanding and the aggregate accreted value of the senior discount notes outstanding was $912.5 million. The exchange offer is conditioned upon: - tender by the holders of at least 85% of this aggregate amount; - the consent by the holders of at least a majority of the aggregate principal amount of the senior notes to the proposed amendments to the senior note indenture; and - the consent by the holders of at least a majority of the aggregate principal amount of the senior discount notes to the proposed amendments to the senior discount notes indenture. Despite any other term of the exchange offer and consent solicitation, we will not be required to accept for exchange, or exchange any new notes and Loral Space warrants for, any existing notes, and we may terminate the exchange offer as provided in this prospectus before accepting any existing notes for exchange if: - the trustee under the indentures has objected to, or taken any action that could adversely affect, the consummation of the exchange offer or the consent solicitation or our ability to effect the proposed amendments to the indentures; - the trustee under the indentures has taken any action that challenges the validity or effectiveness of the procedures we used in the exchange offer or consent solicitation; - the exchange offer, or the making of any exchange by a holder of existing notes, in our reasonable judgment, would violate applicable law or any applicable interpretation of the staff of the SEC; 47 - any action or proceeding has been instituted or threatened in any court or by or before any governmental agency, or any law, statute, rule, regulation, judgment, order, stay, decree or injunction has been promulgated, enacted or entered, with respect to the exchange offer that, in our judgment, could reasonably be expected to impair our ability to proceed with the exchange offer; - there shall have occurred a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation by any governmental agency or authority which adversely affects the extension of credit; - there shall have occurred a commencement of a war, armed hostilities or other similar international calamity directly or indirectly involving the United States, or, in the case of any of the foregoing existing at the time of the commencement of the exchange offer, a material acceleration or worsening thereof; or - any change (or any development involving a prospective change) shall have occurred or be threatened in our business, properties, assets, liabilities, financial condition, operations, results of operations or prospects and our subsidiaries taken as a whole that, in our reasonable judgment, is or may be adverse to us, or we have become aware of facts that, in our reasonable judgment, have or may have adverse significance with respect to the existing notes or the exchange consideration. In addition, we will not be obligated to accept for exchange the existing notes of any holder that has not made to us the representations described under "-- Procedures for Tendering." We expressly reserve the right, at any time or at various times, to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any existing notes by giving oral or written notice of the extension to their holders. During any extension, all existing notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange. We will return any existing notes that we do not accept for exchange for any reason without expense to their tendering holders as promptly as practicable after the expiration or termination of the exchange offer. We expressly reserve the right to amend or terminate the exchange offer, and to reject for exchange any existing notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the existing notes as promptly as practicable. In the case of any extension, the notice will be issued no later than 9:00 a.m., New York City time, on the first business day after the previously scheduled expiration date. These conditions are for our sole benefit and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that we may assert at any time or at various times. In addition, we will not accept for exchange any existing notes tendered, and will not issue exchange consideration in exchange for any such existing notes, if at such time any stop order has been threatened or is in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the new notes indenture under the Trust Indenture Act of 1939. We have agreed with the noteholders party to the lock-up agreement not to consummate the exchange offer if we have failed to make timely disclosure of material information relevant to the investment decision contemplated hereby as required by the federal securities laws, including without limitation any failure to effectuate the cancellation of Loral CyberStar's existing $79.7 million note payable on demand and the issuance of a subordinated note due 2006, as contemplated by the lock-up agreement. INTEREST ON THE NEW NOTES The new notes will bear interest from October 15, 2001, payable semiannually on January 15 and July 15 of each year commencing on July 15, 2002, at the rate of 10% per annum. Holders of the senior 48 notes whose notes are accepted for exchange will be deemed to have waived the right to receive any payment in cash in respect of interest accruing after October 15, 2001. Holders of existing notes whose notes are accepted for exchange will be deemed to have waived the right to receive any payment in exchange consideration or other property in respect of interest accruing or accretions in value after October 15, 2001. PROCEDURES FOR TENDERING Only a holder of existing notes may tender existing notes in the exchange offer. To tender in the exchange offer, a holder must: - complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and mail or deliver such letter of transmittal or facsimile to the exchange agent before the expiration date; or - comply with DTC's Automated Tender Offer Program procedures described below. Holders who complete, sign and date the letter of transmittal or comply with DTC's Automated Tender Offer Program shall be deemed to have made the representations and warranties to us contained in the letter of transmittal. In addition, either: - the exchange agent must receive existing notes along with the letter of transmittal; - the exchange agent must receive, before the expiration date, a timely confirmation of book-entry transfer of the existing notes into the exchange agent's account at DTC according to the procedure for book-entry transfer described below or a properly transmitted agent's message; or - the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at the address set forth below under "-- Exchange Agent and Trustee" prior to the expiration date. The tender by a holder that is not withdrawn before the expiration date will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, including, but not limited to, the agreement by such holders to deliver good and marketable title to the tendered existing notes free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind. We have established a toll-free telephone number you can call beginning 12 trading days prior to the closing of the exchange offer to learn the approximate exercise price of the warrants computed as of the preceding trading day and, on and after the second trading day preceding the closing, the actual warrant exercise price. The number is (877) 485-2033. The recorded message on this telephone number will be updated each day during the 10 trading day period with the average computed exercise price of the warrants through the previous night. During the two trading days before the closing of the exchange offer, the recorded message will state the actual warrant exercise price. We encourage you to call this telephone number. Please be aware, however, that during the 10 trading day period preceding the two trading days prior to the closing, the estimated exercise price of the warrants, as provided in this recorded message, necessarily will be different from the actual exercise price of the warrants to be issued in connection with the exchange offer. The actual exercise price of the warrants to be issued in connection with the exchange offer will not be determined until two trading days prior to the closing of the exchange offer. Delivery of all documents must be made to the exchange agent at its address set forth in this prospectus. Holders may also request that their respective brokers, dealers, commercial banks, trust companies or nominees effect such tender for such holders. 49 The method of delivery of existing notes and the letters of transmittal and all other required documents to the exchange agent is at the election and risk of the holders. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No letter of transmittal or existing notes should be sent to us. Only a holder of existing notes may tender such existing notes in the exchange offer. The term "holder" with respect to the exchange offer means any person in whose name existing notes are registered on our books or any other person who has obtained a properly completed bond power from the registered holder, or any person whose existing notes are held of record by DTC who desires to deliver such existing notes by book-entry transfer at DTC. Any beneficial holder whose existing notes are registered in the name of its broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on the beneficial holder's behalf. In accordance with state securities laws, some beneficial holders will be required to make representations and warranties about themselves contained in the form of instruction to be sent to brokers, dealers, commercial banks, trust companies and other nominees. If such beneficial holder wishes to tender on its own behalf, such beneficial holder must, prior to completing and executing the letter of transmittal and delivering its existing notes, either make appropriate arrangements to register ownership of the existing notes in such holder's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time and may not capable of being completed prior to the expiration date. Signatures on a letter of transmittal or a notice of withdrawal, described below, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office of correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act unless the existing notes are tendered: - by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or - for the account of an eligible guarantor institution. If the letter of transmittal is signed by a person other than the registered holder of any existing notes listed on the existing notes, the existing notes must be endorsed or accompanied by appropriate bond powers which authorize such person to tender the existing notes on behalf of the registered holder, in either case signed as the name of the registered holder or holder appears on the existing notes with the signatures on the existing notes or bond powers guaranteed as provided below. If the letter of transmittal or any existing notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal. Any financial institution that is a participant in DTC's system may use DTC's Automated Tender Offer Program to tender. Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the existing notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent. The term "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that: - DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering existing notes that are the subject of the book-entry confirmation; - the participant has received and agrees to be bound by the terms of the letter of transmittal, including the representations and warranties contained in that letter of transmittal (or, in the case 50 of an agent's message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery); and - the agreement may be enforced against the participant. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All the questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered existing notes will be determined by us in our sole discretion, which determinations will be final and binding. We reserve the absolute right to reject any and all existing notes not validly tendered or any existing notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any irregularities or conditions of tender as to particular existing notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of existing notes must be cured within such time as we shall determine. Neither we, Loral Space, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of existing notes nor shall we, Loral Space or the exchange agent incur any liability for failure to give notification. Tenders of existing notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any existing notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the exchange agent to the tendering holder unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. By signing the letter of transmittal, each holder of existing notes will represent to us that, among other things: - any new notes that the holder receives will be acquired in the ordinary course of business; - neither the holder nor any other person has an arrangement or understanding with any person to participate in the distribution of the new notes; and - neither the holder nor any such other person is our "affiliate" within the meaning of Rule 405 under the Securities Act or, if the holder is our affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the existing notes at DTC for purposes of the exchange offer promptly after the date of this prospectus, and any financial institution participating in DTC's system may make book-entry delivery of existing notes by causing DTC to transfer the existing notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Holders of existing notes who are unable to deliver confirmation of the book-entry tender of their existing notes into the exchange agent's account at DTC or all other documents required by the letter of transmittal to the exchange agent on or prior to the expiration date must tender their existing notes according to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURE Holders who wish to tender their existing notes and (a) whose existing notes are not immediately available, or (b) who cannot deliver their existing notes, the letter of transmittal or any other required 51 documents to the exchange agent prior to the expiration date, or (c) who cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender if: - the tender is made through an eligible guarantor institution; - prior to the expiration date, the exchange agent receives from an eligible guarantor institution a properly completed and duly executed notice of guaranteed delivery (by facsimile transmission, mail or hand delivery) or a properly transmitted agent's message and notice of guaranteed delivery setting forth the name and address of the holder of the existing notes, the registered number or numbers of the existing notes and the principal amount of existing notes tendered, stating that the tender is being made thereby, and guaranteeing that, within three business days after the expiration date, the letter of transmittal (or facsimile thereof), together with the existing notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and - the exchange agent receives a properly completed and executed letter of transmittal (or facsimile thereof), together with the tendered existing notes in proper form for transfer (or confirmation of a book-entry transfer into the exchange agent's account at DTC of existing notes delivered electronically) and all other documents required by the letter of transmittal within three business days after the expiration date. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, holders of existing notes may withdraw their tenders at any time prior to 12:00 midnight, New York City time, on the expiration date. If we elect to provide a subsequent offering period of three to 20 business days after the initial offering period has expired, you will not be entitled to any withdrawal rights during the extension period. To withdraw a tender of existing notes in the exchange offer, the exchange agent must receive a written or facsimile transmission notice of withdrawal at its address set forth in this prospectus prior to 12:00 midnight, New York City time, on the expiration date; or holders must comply with the appropriate procedures of DTC's Automated Tender Offer Program System. Any such notice of withdrawal must: - specify the name of the person who tendered the existing notes to be withdrawn; - identify the existing notes to be withdrawn (including the principal amount of such existing notes); and - where certificates for existing notes have been transmitted, specify the name in which the existing notes were registered, if different from that of the withdrawing holder. If certificates for existing notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, the withdrawing holder must also submit: - the serial numbers of the particular certificates to be withdrawn; and - a signed notice of withdrawal with signatures guaranteed by an eligible guarantor institution unless the holder is an eligible guarantor institution. If certificates for existing notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, the withdrawing holder must also submit: - the serial numbers of the particular certificates to be withdrawn; and - a signed notice of withdrawal with signatures guaranteed by an eligible guarantor institution unless the holder is an eligible guarantor institution. If the existing notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn existing notes and otherwise comply with the procedures of the book-entry transfer 52 facility. We will determine all questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices, and our determination shall be final and binding on all parties. We will deem any existing notes so withdrawn not to have been validly tendered for purposes of the exchange offer and no new notes will be issued with respect thereto unless the existing notes so withdrawn are validly tendered. Any existing notes which have been tendered but which are not accepted for exchange will be returned to their holder without cost to the holder or, in the case of existing notes tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described above, the existing notes will be credited to an account maintained with DTC for existing notes as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn existing notes may be tendered by following one of the procedures described under "-- Procedures for Tendering" at any time prior to the expiration date. If you withdraw your tender of existing notes, your consent to the proposed amendments of the indentures will also be deemed to be withdrawn. You may not withdraw your consent without withdrawing your tender of the existing notes. DEALER MANAGERS AND SOLICITATION AGENTS We and Loral Space have engaged Dresdner Kleinwort Wasserstein, Inc. to act as lead dealer manager and lead solicitation agent in connection with the exchange offer and consent solicitation and to provide financial advisory services to us and Loral Space in connection with the exchange offer. Banc of America Securities LLC, J.P. Morgan Securities Inc. and Lehman Brothers Inc. are acting as co-dealer managers and co-solicitation agents in connection with the exchange offer and consent solicitation. If you have questions concerning the terms of the exchange offer or consent solicitation, you may contact the dealer managers at the addresses and telephone numbers on the back cover page of this document. We and Loral Space have agreed to pay the dealer managers customary fees for their services, including reasonable out-of-pocket expenses and fees and expenses of legal counsel. We and Loral Space have agreed to indemnify the dealer managers against specified liabilities, including specified liabilities under the federal securities laws. The dealer managers have provided in the past, and currently are providing, other investment banking and financial advisory services to us and our affiliates. EXCHANGE AGENT AND TRUSTEE Bankers Trust Company has been appointed as exchange agent for the exchange offer. Questions as to procedures for tendering and requests for additional copies of this prospectus or the letter of transmittal should be directed to the exchange agent addressed as follows: By Mail: BT Services Tennessee, Inc. Reorganization Unit P.O. Box 292737 Nashville, TN 37229-2737 By Overnight Carrier: BT Services Tennessee, Inc. Reorganization Unit 648 Grassmere Park Rd. Nashville, TN 37211 Facsimile Transmission: (615) 835-3701 Confirm by Telephone: (800) 735-7777
You and your broker, dealer, commercial bank, trust company or other nominee should send letters of transmittal and all correspondence in connection with the exchange offer to the exchange agent at the address and telephone number listed above. 53 Bankers Trust Company is also serving as the trustee under the existing notes indenture and will also serve as the trustee for the new notes. All deliveries, correspondence and questions sent or presented to the trustee relating to the exchange offers should be directed to the trustee as follows: By Mail: 4 Albany Street New York, NY 10006 By Telephone: (800) 735-7777
We and Loral Space maintain, or may in the future maintain, normal banking relationships with Bankers Trust Company in the ordinary course of business. INFORMATION AGENT Morrow & Co., Inc. has been appointed as information agent for the exchange offer. Questions and requests for assistance should be directed to the information agent addressed as follows: U.S. noteholders call: (800) 607-0088 International noteholders call collect: (212) 754-8000 Banks and brokerage firms call: (800) 654-2468
WARRANT AGENT The Bank of New York has been appointed as warrant agent for the exchange offer. Questions and requests for assistance should be directed to the warrant agent as follows: By Mail: 101 Barclay Street Floor 21-West New York, NY 10286 By Facsimile: (212) 896-7298 By Telephone: (212) 896-7202
FEES AND EXPENSES We will bear the expenses of soliciting tenders. The principal solicitation for tenders is being made by mail; however, we may make additional solicitations by telegraph, facsimile, telephone or in person by our officers and regular employees and those of our affiliates. Except as described herein, we will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. However, we will pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus, letters of transmittal and related documents to the beneficial owners of the existing notes and in handling or forwarding tenders for exchange. We have agreed to pay (i) the fees and expenses (including reasonable fees and expenses of counsel) of Loral Space in connection with the negotiation, execution and delivery of the lock-up agreement and the exchange offer, (ii) the fees and expenses of Wachtell, Lipton, Rosen & Katz, counsel to the consenting holders under the lock-up agreement, (iii) our expenses, including investment banking, financial advisory, printing, legal, accounting, solicitation agent, and information agent fees and expenses, (iv) expenses incurred to obtain a rating of the new notes and (v) fees and expenses of the trustee for the new notes; provided that the maximum amount payable by us will not exceed $5 million. We will pay other cash expenses to be incurred in connection with the exchange offer, including SEC registration fees and related fees and expenses. 54 TRANSFER TAXES We will pay all transfer taxes, if any, applicable to the exchange of existing notes under the exchange offer. If, however, certificates representing new notes or existing notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the existing notes tendered, or if tendered existing notes are registered in the name of any person other than the person signing the letter of transmittal, or if a transfer tax is imposed for any reason other than the exchange of existing notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. CONSEQUENCES OF FAILURE TO EXCHANGE The holders of 49.04% in aggregate principal amount of our senior notes and 51.43% of the aggregate principal amount at maturity of our senior discount notes have already agreed to tender their existing notes in the exchange offer. If you do not exchange your existing notes for the exchange consideration in the exchange offer, you will continue to hold your existing notes subject to the terms and conditions of the indentures under which the existing notes were issued. However, if the conditions to the exchange offer are met and the exchange is consummated, the existing indentures will be amended by the proposed amendments that will materially reduce the covenants and events of default to which we are subject under the indentures. For a description of the proposed amendments to the indentures, see "The Proposed Amendments." If you do not tender your existing notes in the exchange offer, you will not be entitled to receive the exchange consideration which includes a guaranty by Loral Space and the Hong Kong subsidiary and warrants to purchase shares of common stock of Loral Space. 55 DESCRIPTION OF THE NEW NOTES The following is a summary of the terms of the new notes that we propose to issue in this exchange offer. The new notes will be issued under an indenture between us and the trustee for the holders of the new notes. The terms of the new notes include those terms stated in the new notes indenture and those terms made part of the new notes indenture by reference to the Trust Indenture Act of 1939. This section is only a summary of the material provisions of the new notes indenture. This section, however, does not purport to be complete and does not restate the new notes indenture in its entirety. A copy of the new notes indenture has been filed with the SEC as an exhibit to the registration statement of which this prospectus is a part. We urge you to read the new notes indenture because the new notes indenture and not this description defines your rights as holders of the new notes. You may obtain copies of the new notes indenture from us. See "Where You Can Find More Information." This section uses defined terms. See "-- Certain Definitions." The new notes are to be issued under a new notes indenture, to be dated as of the Closing Date, between us, as issuer, each of our Restricted Subsidiaries, as Subsidiary Guarantors, Loral Space & Communications Ltd., as Parent Guarantor, and Bankers Trust Company, as trustee. As used in this Description of New Notes, the terms "we," "our" and "us" refer to Loral CyberStar, Inc. GENERAL The New Notes - have a maximum aggregate principal amount of $675.0 million; - mature on July 15, 2006; - are dated as of October 15, 2001; - accrue interest at 10% per year, payable semi-annually on each of January 15 and July 15 of each year, beginning July 15, 2002. The initial interest payment on July 15, 2002 will include interest accrued from October 15, 2001; and - are our unsubordinated obligations. We will pay interest on the new notes semi-annually in arrears on the interest payment dates. Principal of, premium, if any, and interest on the new notes will be payable, and the new notes may be exchanged or transferred, at our office or agency maintained for those purposes. At our option, we may pay interest by check mailed to the address of the holders as such address appears in the security register maintained by the trustee, who will initially act as the paying agent and registrar for the new notes. We will issue the new notes in fully registered form, without coupons, in denominations of $1,000 of principal amount and any integral multiple thereof or in global form, as appropriate. See "The Exchange Offer -- Book-Entry Transfer." We will not charge a service fee for any registration of transfer or exchange of new notes, but we may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. OPTIONAL REDEMPTION Redemption At Any Time. The new notes will be redeemable, at our option, in whole or in part, at any time or from time to time prior to maturity (any such date, the "Redemption Date"), upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each holder's last address as it appears in the security register, at a redemption price equal to (i) the principal amount of the new notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date, plus (iii) the Make Whole Premium. The "Called Principal" means the principal amount of a new note to be redeemed. 56 The "Make Whole Premium" means, with respect to any new note, an amount (which in no event may be less than zero) equal to the excess, if any, of (x) the Discounted Value of the Called Principal over (y) the amount of such Called Principal. The "Discounted Value" shall be determined with respect to any Called Principal of any new note by discounting all Remaining Scheduled Payments with respect to the Called Principal from their respective scheduled due dates to the Redemption Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the new notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. The "Remaining Scheduled Payments" means, with respect to the Called Principal of any new note, all payments of such Called Principal and interest thereon that would be due after the Redemption Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Redemption Date is not a date on which interest payments are due to be made under the terms of the new notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Redemption Date and required to be paid on such Redemption Date. The "Reinvestment Yield" means 50 basis points over the yield to maturity implied by the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Redemption Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Redemption Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security having a maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security having a maturity closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Redemption Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. Redemption With Excess Cash Flow. The new notes will also be redeemable, at our option, in whole or in part, at any time or from time to time prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each holders' last address as it appears in the security register, in an aggregate principal amount not to exceed $100 million, at a redemption price equal to (i) 101% of the principal amount of the new notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date. Any such redemption shall be payable only out of Excess Cash Flow. The aggregate cumulative amount of any such redemption(s) shall be called the "Excess Cash Flow Redemption Payments." Partial Redemption. In the case of any partial redemption, selection of the new notes for redemption will be made by the trustee in compliance with the requirements of the principal national securities exchange, if any, on which the relevant new notes are listed or, if such new notes are not listed on a national securities exchange, on a pro rata basis, by lot or by such other method as such trustee in its sole discretion shall deem to be fair and appropriate; provided that no new note of $1,000 in principal amount or less shall be redeemed in part. If any new note is to be redeemed in part only, the notice of redemption relating to such new note shall state the portion of the principal amount thereof to be redeemed. A new note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. 57 GUARANTIES Our obligations under the new notes are fully and unconditionally guaranteed on a senior, unsecured basis by the Parent Guarantor and the Subsidiary Guarantors. See "Description of Loral Space Guaranty." Notwithstanding the foregoing, the Subsidiary Guaranty shall not be enforceable against any Subsidiary Guarantor in an amount in excess of the net worth of the Subsidiary Guarantor at the time that determination of the net worth is, under applicable law, relevant to the enforceability of the Subsidiary Guaranty. The Subsidiary Guarantor's net worth shall include any claim of the Subsidiary Guarantor against us or any other Guarantor for reimbursement and any claim against any other Guarantor for contribution. RANKING The indebtedness evidenced by the new notes ranks equal with our existing and future unsubordinated indebtedness. The new notes rank senior to all our subordinated indebtedness, including the Subordinated Intercompany Note. If we default, the holders are entitled to be paid in full before any of our subordinated debt. In addition, the trustee for the holders will have the right to block payments on our subordinated debt for certain time periods if there is a default under the new notes. The indebtedness evidenced by the Subsidiary Guaranties ranks equal with the relevant Restricted Subsidiary's existing and future unsubordinated indebtedness. Each Subsidiary Guaranty ranks senior to all subordinated debt of such Restricted Subsidiary, including the Subordinated Subsidiary Guarantors Guaranties. If the Restricted Subsidiary defaults, the holders are entitled to be paid in full before any subordinated debt of the Restricted Subsidiary. In addition, the trustee for the holders will have the right to block payments on the subordinated debt of a Restricted Subsidiary for certain time periods if there is a default under its Subsidiary Guaranty. The indebtedness evidenced by the Loral Space Guaranty ranks equal with Loral Space's existing and future unsubordinated indebtedness, including Loral Space's indebtedness under its 9 1/2% Senior Notes due 2006. The Loral Space Guaranty ranks senior to subordinated debt of Loral Space, including Loral Space's subordinated guaranty of the Subordinated Intercompany Note. If Loral Space defaults, the holders are entitled to be paid in full before any subordinated debt of Loral Space. In addition, the trustee for the holders will have the right to block payments on Loral Space's subordinated debt for certain time periods if there is a default under the Loral Space Guaranty. CERTAIN DEFINITIONS We have set forth below a summary of certain terms used in this description of the new notes. You should read the new notes indenture for the full definition of all terms. "Acquired Indebtedness" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition by a Restricted Subsidiary and not Incurred in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition. "Adjusted Consolidated Net Income" means, for any period, our aggregate net income (or loss) and the aggregate net income (or loss) of our Subsidiaries for such period determined in conformity with GAAP; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (i) the net income (or loss) of any person (other than net income or loss attributable to a Restricted Subsidiary) in which any person (other than us or any of our Restricted Subsidiaries) has a joint interest and the net income (or loss) of any Unrestricted Subsidiary, except that Adjusted Consolidated Net Income for any period shall include the amount of dividends or other distributions actually paid to us or any of our Restricted Subsidiaries by such other person or such Unrestricted Subsidiary during such period; 58 (ii) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of paragraph (a) of the "Limitation on Restricted Payments" covenant described below (and in such case, except to the extent includable pursuant to clause (i) above), the net income (or loss) of any person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with us or any of our Restricted Subsidiaries or all or substantially all of the property and assets of such person are acquired by us or any of our Restricted Subsidiaries; (iii) any gains or losses (on an after-tax basis) attributable to Asset Sales; (iv) except for purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of paragraph (a) of the "Limitation on Restricted Payments" covenant described below, any amount paid or accrued as dividends on our Preferred Stock or Preferred Stock of any Restricted Subsidiary owned by persons other than us and any of our Restricted Subsidiaries; (v) all extraordinary gains and extraordinary losses; (vi) any net income (or loss) of any Subsidiary Guarantor that ceases to be a Subsidiary Guarantor because it is designated an Unrestricted Subsidiary; and (vii) the Interest Amortization Credit. "Adjusted Consolidated Net Tangible Assets" means our total amount of assets and the total amount of assets of our Restricted Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all our current liabilities and the current liabilities of our Restricted Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on our most recent quarterly or annual consolidated balance sheet and on the most recent quarterly or annual consolidated balance sheet of our Restricted Subsidiaries, prepared in conformity with GAAP and filed with the SEC pursuant to the "Commission Reports and Reports to Holders" covenant. "Affiliate" means, as applied to any person, any other person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise. "Asset Acquisition" means (i) an investment by us or any of our Restricted Subsidiaries in any other person pursuant to which such person shall become a Restricted Subsidiary or shall be merged into or consolidated with us or any of our Restricted Subsidiaries; provided that such person's primary business is related, ancillary or complementary to our businesses and to the businesses of our Restricted Subsidiaries on the date of such investment or (ii) an acquisition by us or any of our Restricted Subsidiaries of the property and assets of any person other than ourselves or any of our Restricted Subsidiaries that constitute substantially all of a division or line of business of such person; provided that the property and assets acquired are related, ancillary or complementary to our businesses and to the businesses of our Restricted Subsidiaries on the date of such acquisition. "Asset Disposition" means the sale or other disposition by us or any of our Restricted Subsidiaries (other than to us or another Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of any Restricted Subsidiary or (ii) all or substantially all of the assets that constitute a division or line of our business or of any Restricted Subsidiaries. Asset Disposition shall not include the Data Business Transfer. 59 "Asset Sale" means any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by us or any of our Restricted Subsidiaries to any person other than us or any of our Restricted Subsidiaries of: (i) all or any of the Capital Stock of any Restricted Subsidiary; (ii) all or substantially all of the property and assets of one of our operating units or our business or of any of our Restricted Subsidiaries; or (iii) any of our other property and assets or of any of our Restricted Subsidiaries outside the ordinary course of our business or the business of such Restricted Subsidiary and, in each case, that is not governed by the provisions of the new notes indenture applicable to mergers, consolidations and sales of our assets; provided that "Asset Sale" shall not include the Data Business Transfer. "Average Life" means, at any date of determination with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security and (b) the amount of such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means our Board of Directors or any committee of such Board of Directors duly authorized to act with respect to the new notes indenture from time to time. "Board Resolution" means a copy of a resolution, certified by any of our Executive Officers, our Secretary or our Assistant Secretaries to have been duly adopted by our Board of Directors and to be in full force and effect on the date of the certification, and delivered to the Trustee. "Business Day" means a day except Saturday, Sunday or other day on which commercial banks in the City of New York, or in the city of the corporate trust office of the Trustee, are authorized by law to close. "Capital Stock" means, with respect to any person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such person, whether now outstanding or issued after the Closing Date, including, without limitation, all of such person's common stock and preferred stock. "Capitalized Lease" means, as applied to any person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such person; and "Capitalized Lease Obligations" means the discounted present value of the rental obligations under such lease. "Certificated Note" means a certificated note registered in the name of the holder thereof and issued in accordance with the new notes indenture. "Change of Control" means such time as (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power of the issued and outstanding Voting Stock of Loral Space; (ii) Loral Space shall not directly or indirectly own all of our Capital Stock; (iii) individuals who on the Closing Date constitute the Board of Directors of Loral Space (together with any new directors whose election by the Board of Directors of Loral Space or whose nomination for election by Loral Space's stockholders was approved by a vote of at least a majority of the members of the Board of Directors of Loral Space then in office who either were members of the Board of Directors of Loral Space on the Closing Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors of Loral Space then in office; and 60 (iv) any change in control (or similar event, however denominated) with respect to Loral Space shall occur under and as defined in any indenture or agreement in respect of Indebtedness in an aggregate principal amount in excess of $10,000,000 to which Loral Space is a party, including the indenture relating to Loral Space's 9 1/2% Senior Notes due 2006. "Chief Executive Officer" of the Company means the chief executive officer or, in the event of his termination or inability to perform his duties, such other of our Executive Officers as we may designate. "Closing Date" means the date on which the new notes are originally issued under the new notes indenture. "Commission" means the United States Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Consolidated EBITDA" means, for any period, the sum of the amounts for such period of: (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest Expense, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income, (iii) income taxes, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income (other than income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales of assets), (iv) depreciation expense, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income, (v) amortization expense, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income, and (vi) all other non-cash items or impairments reducing Adjusted Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be made), less all non-cash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for us and our Restricted Subsidiaries in conformity with GAAP. "Consolidated Interest Expense" means, for any period, the aggregate amount of interest in respect of Indebtedness (excluding the Interest Amortization Credit, but including, without limitation, amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements; and interest in respect of Indebtedness that is Guaranteed or secured by us or any of our Restricted Subsidiaries) and all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by us and our Restricted Subsidiaries during such period; excluding, however, any premiums, fees and expenses (and any amortization thereof) payable in connection with the offering of the new notes, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. "Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of (i) the aggregate actual amount of our Indebtedness and the Indebtedness of our Restricted Subsidiaries (excluding the Subordinated Intercompany Note and the Subordinated Subsidiary Guarantors Guaranties of the Subordinated Intercompany Note) on a consolidated basis outstanding on such Transaction Date to (ii) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters for which our financial statements have been filed with the Commission pursuant to the "Commission Reports and Reports to Holders" covenant described below (such four fiscal quarter period being the "Four Quarter Period"); provided that (A) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions 61 (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur from the beginning of the Four Quarter Period through the Transaction Date (the "Reference Period"), as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and (B) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that have been made by any person that has become a Restricted Subsidiary or has been merged with or into us or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such person was a Restricted Subsidiary as if such Asset Dispositions or Asset Acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (A) or (B) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the person, or division or line of business of the person, that is acquired or disposed for which financial information is available. "Consolidated Net Worth" means, at any date of determination, stockholders' equity as set forth on our or our Restricted Subsidiaries' most recently available quarterly or annual consolidated balance sheet (which shall be as of a date not more than 90 days prior to the date of such computation), less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of our Capital Stock or the Capital Stock of any of our Restricted Subsidiaries, each item to be determined in conformity with GAAP (excluding the effects of foreign currency exchange adjustments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 52). "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect us or any Restricted Subsidiary against fluctuations in currency values. "Data Business Transfer" means the transfer of the data services business of us and our Subsidiaries to Loral SpaceCom Corporation in exchange for a portion of the intercompany indebtedness owing by us to Loral SpaceCom Corporation on the Closing Date as described in this prospectus including under the caption "Summary -- Loral CyberStar Unaudited Consolidated Pro Forma Financial Statements." "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Designated Equity Proceeds" means the amount of Net Cash Proceeds received by Loral Space after the Closing Date from the issuance and sale of Capital Stock (other than Disqualified Stock) of Loral Space to the extent such Net Cash Proceeds are ultimately contributed to our capital. "Disqualified Stock" means any class or series of Capital Stock of any person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the new notes, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the new notes, or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the new notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the new notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in "Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control" covenants described below and such Capital 62 Stock specifically provides that such person will not repurchase or redeem any such stock pursuant to such provision prior to our repurchase of such new notes as are required to be repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control" covenants described below. "Excess Cash Flow" means, for any period of determination, (i) Consolidated EBITDA for such period, less (ii) all capital expenditures, all cash taxes, all cash interest expense and bank fees, and all principal payments on the new notes, in each case actually made for such period, plus (iii) any non-cash restructuring or special charges taken during such period. "Executive Officer" means the Chairman of the Board, Chief Executive Officer, President, any Vice President or any other officer that is considered by the Board of Directors to be an executive officer of the Company. "fair market value" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations contained or referred to in the new notes indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of the new notes indenture shall be made without giving effect to (i) the amortization of any expenses incurred in connection with the offering of the new notes and (ii) except as otherwise provided, the amortization or other impairment charges or writedowns of any amounts required or permitted by Accounting Principles Board Opinion No. 16 "Business Combinations," APB No. 17 "Intangible Assets," Statement of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations," SFAS No. 142 "Goodwill and Other Intangible Assets" or SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." "Global Note" means the global notes issued in accordance with the new notes indenture. "Guarantors" means, collectively, all Subsidiary Guarantors and the Parent Guarantor. "Guaranty" means any obligation, contingent or otherwise, of any person directly or indirectly guaranteeing any Indebtedness or other obligation of any other person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guaranty" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guaranty" used as a verb has a corresponding meaning. "Incur" means, with respect to any Indebtedness, to incur, create, issue, assume, Guaranty or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness, including an "Incurrence" of Indebtedness by reason of a person becoming a Restricted Subsidiary; provided that neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. 63 "Indebtedness" means, with respect to any person at any date of determination (without duplication), (i) all indebtedness of such person for borrowed money, (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the ordinary course of business of such person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such person of a demand for reimbursement), (iv) all obligations of such person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (v) all obligations of such person as lessee under Capitalized Leases, (vi) all Indebtedness of other persons secured by a Lien on any asset of such person, whether or not such Indebtedness is assumed by such person; provided that the amount of such Indebtedness, which is not so assumed, shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of other persons Guaranteed by such person to the extent such Indebtedness is Guaranteed by such person, and (viii) to the extent not otherwise included in this definition, obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that (A) the amount outstanding at any time with respect to any Indebtedness issued with original issue discount is the original issue price of such Indebtedness, (B) Permitted Customer Advances and Prepayment Supports shall be deemed not to be "Indebtedness" and (C) Indebtedness shall not include any liability for federal, state, local or other taxes. "Independent Financial Advisor" means an investment banking firm, accounting firm or other financial advisory firm of national standing in the United States, as the case may be, (i) which, in the judgment of the Board of Directors, does not, and whose directors, officers or Affiliates do not, have a material direct or indirect financial interest in us (provided that ownership of our Capital Stock constituting less than 2% of all our outstanding Capital Stock shall not constitute a material direct or indirect financial interest), and (ii) which, in the judgment of the Board of Directors, is otherwise independent and qualified to perform the task for which it is to be engaged. "Interest Amortization Credit" means the reduction in interest expense resulting from the amortization of the difference between the carrying value of the new notes recorded upon issuance less the actual principal amount of the new notes. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement designed to protect us or any of our Restricted Subsidiaries against fluctuations in interest rates in respect of Indebtedness to or under which we or any of our Restricted Subsidiaries is a party or beneficiary on the date of this Indenture or becomes a party or a beneficiary hereafter; provided that the notional principal 64 amount thereof does not exceed the principal amount of the Indebtedness of us and our Restricted Subsidiaries that bears interest at floating rates. "Investment" in any person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guaranty or similar arrangement; but excluding advances to customers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable on our or our Restricted Subsidiaries' balance sheet) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, such person and shall include (i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock (or any other Investment), held by us or any of our Restricted Subsidiaries, of (or in) any person that has ceased to be a Restricted Subsidiary, including, without limitation, by reason of any transaction permitted by clause (iii) of the "Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries" covenant. For purposes of the definition of "Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant described below, (i) "Investment" shall include the fair market value of the assets (net of liabilities (other than liabilities to us or any of our Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of liabilities (other than liabilities to us or any of our Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments and (iii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer. "Kingston" means Kingston Communications International Limited, a company incorporated under the laws of England, and its successors and assigns. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "Loral Space" means Loral Space & Communications Ltd. "Loral Space Guaranty" means the Guaranty by Loral Space in favor of the trustee for the benefit of the holders of the new notes of our obligations under the new notes and the new notes indenture. "Matra" means Matra Marconi Space UK Limited, a company incorporated under the laws of England that is the parent company of MMS Space Systems, a subsidiary of Matra Marconi Space N. V. and the manufacturer under the Telstar 12 Satellite Contract. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to us or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents (including cash or cash equivalents that are deposited in escrow pending satisfaction of conditions specified in the relevant sale documents or that secures Prepayment Supports, in each case when such cash or cash equivalents are released to us or a Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to our or our Restricted Subsidiaries' consolidated results of operations, taken as a whole, (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (A) is secured by a Lien on the property or assets sold or (B) is required to be paid as a result of such sale and (iv) appropriate amounts to be provided by us or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post- 65 employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP and (b) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to us or any Restricted Subsidiary) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Notes Guaranties" means the Loral Space Guaranty and the Subsidiary Guaranties. "Offer to Purchase" means an offer to purchase new notes by us from the holders commenced by mailing a notice to the trustee and each holder stating: (i) the covenant pursuant to which the offer is being made and that all new notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any new note not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless the we default in the payment of the purchase price, any new note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that holders electing to have a new note purchased pursuant to the Offer to Purchase will be required to surrender the new note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the new note completed, to the paying agent at the address specified in the notice prior to the close of business on the third Business Day immediately preceding the Payment Date; (vi) that holders will be entitled to withdraw their election if the paying agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such holder, the principal amount of new notes delivered for purchase and a statement that such holder is withdrawing his election to have such new notes purchased; and (vii) that holders whose new notes are being purchased only in part will be issued new notes equal in principal amount to the unpurchased portion of the new notes surrendered; provided that each new note purchased and each new note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, we shall (i) accept for payment on a pro rata basis new notes or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the paying agent money sufficient to pay the purchase price of all new notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the trustee all new notes or portions thereof so accepted together with an Officers' Certificate specifying the new notes or portions thereof accepted for payment by us. The paying agent shall promptly mail to the holders of new notes so accepted payment in an amount equal to the purchase price, and the trustee shall promptly authenticate and mail to such holders a new note equal in principal amount to any unpurchased portion of the new note surrendered; provided that each new note purchased and each new note issued shall be in a principal amount of $1,000 or integral multiples thereof. We will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The trustee shall act as the paying agent for an Offer to Purchase. We will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and 66 regulations are applicable, in the event that the we are required to repurchase new notes pursuant to an Offer to Purchase. "Officer" means, with respect to us, (i) any of our Executive Officers or any of our Directors or (ii) our Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary. "Opinion of Counsel" means a written opinion signed by legal counsel who may be our employee or our outside counsel. Each such Opinion of Counsel shall include the statements provided for in the United States Trust Indenture Act of 1939, as amended, Section 314(e), if applicable. "Orion Atlantic" means International Private Satellite Partners, L.P., a Delaware limited partnership. "Parent Guarantor" means Loral Space & Communications Ltd. "Permitted Customer Advances" means our obligations or obligations of any Restricted Subsidiary to repay money received by us or such Restricted Subsidiary from customers as bona fide prepayment for services to be provided by, or purchases to be made from, us or such Restricted Subsidiary. "Permitted Investment" means (i) an Investment in us or a Restricted Subsidiary or a person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, us or a Restricted Subsidiary; provided that such person's primary business is related, ancillary or complementary to our businesses and the businesses of our Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash Investments; (iii) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; and (iv) stock, obligations or securities received in satisfaction of judgments. "Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (ii) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of our business or the business of any of our Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon real or personal property acquired after the Closing Date; provided that (a) such Lien is created solely for the purpose of 67 securing Indebtedness Incurred in accordance with the "Limitation on Indebtedness" covenant described below, (1) to finance the cost (including the cost of improvement, transportation, development and design, installation, integration or construction) of the item of property or assets subject thereto and such Lien is created prior to, at the time of or within six months after the later of the acquisition, the completion of construction or the commencement of full operation of such property (or such shorter period as is set forth in such covenant) or (2) to refinance any Indebtedness previously so secured, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such cost (plus, in the case of any refinancing Indebtedness referred to in clause (vi)(a)(2) above, premiums, accrued interest, fees and expenses), and (c) any Lien permitted by this clause shall not extend to or cover any property or assets other than such item of property or assets and any improvements on such item; (vii) leases or subleases granted to others that do not materially interfere with the ordinary course of our business or the business of our Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of ours or of our Restricted Subsidiaries relating to such property or assets; (ix) any interest or title of a lessor in the property subject to any Capitalized Lease or operating lease; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases permitted pursuant to clause (ix) above; (xi) Liens on property of, or on shares of Capital Stock or Indebtedness of, any person existing at the time such person becomes, or such property becomes a part of, any Restricted Subsidiary; provided that such Liens (a) do not extend to or cover any of our property or assets or the property or assets of any Restricted Subsidiary other than the property or assets so acquired and (b) were not incurred in contemplation of the acquisition thereof; (xii) Liens in favor of us or any Restricted Subsidiary; (xiii) Liens arising from the rendering of a final judgment or order against us or any Restricted Subsidiary that does not give rise to an Event of Default; provided that any reserve or other appropriate provision that shall be required in conformity with GAAP shall have been made therefor; (xiv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xv) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xvi) Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Interest Rate Agreements and Currency Agreements and forward contracts, options, future contracts, futures options or similar agreements or arrangements designed solely to protect us or any of our Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities; (xvii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by us or any of our Restricted Subsidiaries in the ordinary course of business in accordance with our past practices and the past practices of our Restricted Subsidiaries prior to the Closing Date; (xviii) [Intentionally Omitted]; 68 (xix) Liens (including Liens securing Prepayment Supports) on amounts of money or Temporary Cash Investments that each represent bona fide prepayments of at least $5 million on agreements for the long-term sale or lease of capacity on any satellite owned by us or a Restricted Subsidiary, but only to the extent that the amount of money or Temporary Cash Investments subject to any such Lien does not exceed the amount of such prepayment and reasonable interest thereon; (xx) Liens encumbering contracts between us or any Restricted Subsidiary and any third party customer relating to use of a VSAT owned by us or any Restricted Subsidiary but only if, and so long as, the Indebtedness secured by any such Lien is also secured by a Lien permitted under clause (vi) of this definition encumbering such VSAT; and (xxi) Liens upon a satellite and components thereof during the period in which such satellite is being constructed, provided that (a) such Liens (1) are for the benefit of only the manufacturer of such satellite or components and (2) secure only our obligation or the obligation of any Restricted Subsidiary to pay the purchase price for such satellite or components and (b) such Liens are actually released upon, or prior to, the completion of construction of such satellite and prior to the launch or commencement of full operations of such satellite. "Prepayment Support" means our reimbursement obligations or the reimbursement obligations of any Restricted Subsidiary in connection with any fully secured letter of credit or similar credit support issued by any third party in connection with our obligations or the obligations of such Restricted Subsidiary to repay amounts received as bona fide prepayments of at least $5 million on agreements for the long-term sale or lease of capacity on a satellite owned by us or a Restricted Subsidiary. "Released Indebtedness" means, with respect to any Asset Sale, Indebtedness (i) which is owed by us or any Restricted Subsidiary (the "Obligors") prior to such Asset Sale, (ii) which is assumed by the purchaser or any affiliate thereof in connection with such Asset Sale and (iii) with respect to which the Obligors receive written, unconditional releases from each creditor, no later than the closing date of such Asset Sale. "Replacement Satellite" means the replacement satellite for the satellite known as Telstar 11. "Restricted Subsidiary" means any Subsidiary of ours other than an Unrestricted Subsidiary. "S&P" means Standard & Poor's Ratings Group and its successors. "Significant Subsidiary" means, at any date of determination, any Restricted Subsidiary that, together with its Subsidiaries, (i) for our most recent fiscal year, accounted for more than 10% of our consolidated revenues and the consolidated revenues of our Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of our consolidated assets and the consolidated assets of our Restricted Subsidiaries, all as set forth on our most recently available consolidated financial statements for such fiscal year. "Stated Maturity" means, (i) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (ii) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "Subordinated Intercompany Note" means the 10% subordinated promissory note due July 30, 2006 to be issued by us on the Closing Date to Loral SpaceCom Corporation in exchange for a portion of the intercompany indebtedness owed by us to Loral SpaceCom Corporation on the Closing Date. "Subordinated Loral Space Guaranty" means the subordinated guaranty of the Subordinated Intercompany Note executed by Loral Space in favor of the holder of the Subordinated Intercompany Note. 69 "Subordinated Subsidiary Guarantors Guaranties" means the subordinated guaranties of the Subordinated Intercompany Note executed by the Subsidiary Guarantors in favor of the holder of the Subordinated Intercompany Note. "Subsidiary" means, with respect to any person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such person and one or more other Subsidiaries of such person. "Subsidiary Guarantors" means, collectively, all Restricted Subsidiaries; provided that any person that becomes an Unrestricted Subsidiary in compliance with the "Limitation on Restricted Payments" covenant shall not be included in "Subsidiary Guarantors" after becoming an Unrestricted Subsidiary. "Subsidiary Guaranty" means the Guaranty by the Subsidiary Guarantors of the our obligations under the new notes and the new notes indenture, pursuant to the new notes indenture. "Successful Launch" means, with respect to any satellite, the placing into orbit of such satellite in its assigned orbital position with at least 40% of the transponder capacity fully operational. "Telstar 10" means the satellite known as Telstar 10/Apstar IIR (formerly known as Orion 3), and any replacement for such satellite. "Telstar 11" means the satellite known as Telstar 11 (formerly known as Orion 1), and any replacement for such satellite. "Telstar 12" means the satellite known as Telstar 12 (formerly known as Orion 2), and any replacement for such satellite. "Telstar 11 Satellite Contract" means the fixed price turnkey contract originally between British Aerospace Public Limited Company and Orion Atlantic for the design, construction, launch and delivery in orbit of Telstar 11. "Telstar 12 Satellite Contract" means the spacecraft purchase agreement between us and Matra for construction and launch of Telstar 12. "Temporary Cash Investment" means any of the following: (i) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, (ii) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of ours) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, and 70 (v) securities with maturities of six months or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or Moody's. "Trade Payables" means, with respect to any person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services, in each case which is required to be paid within one year. "Transaction Date" means, with respect to the Incurrence of any Indebtedness by us or any of our Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "TT&C Financing" means the agreement, dated November 23, 1993, between General Electric Capital Corporation and International Satellite Partners, L.P. ("Orion Atlantic"), relating to borrowings by Orion Atlantic, which obligations have been assumed by us. "Unrestricted Subsidiary" means (i) any Subsidiary of ours that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of ours) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, us or any Restricted Subsidiary; provided that (A) any Guaranty by us or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an Incurrence of such Indebtedness and an Investment by us or such Restricted Subsidiary (or both, if applicable) at the time of such designation; (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under the "Limitation on Restricted Payments" covenant described below, and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under the "Limitation on Indebtedness" and "Limitation on Restricted Payments" covenants described below. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately after giving effect to such designation (x) we could Incur $1.00 of additional Indebtedness under the first paragraph of the "Limitation on Indebtedness" covenant described below and (y) no Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the trustee by promptly filing with the trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations of, obligations fully guaranteed by, or participations in pools consisting solely of obligations of or obligations guaranteed by, the United States of America for the payment of which guaranty or obligations the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the option of the issuer thereof. "Voting Stock" means with respect to any person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such person. "Wholly Owned" means, with respect to any Subsidiary of any person, the ownership, beneficially and of record, of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares and Investments by foreign nationals mandated by applicable law) by such person or one or more Wholly Owned Subsidiaries of such person. 71 COVENANTS The new notes indenture contains covenants with which we and our Restricted Subsidiaries must comply. The new notes indenture will contain, among others, the following covenants. LIMITATION ON INDEBTEDNESS (a) We will not, and will not permit any of our Restricted Subsidiaries to, Incur any Indebtedness (other than the new notes, the Subsidiary Guaranties and Indebtedness existing on the Closing Date (including the Existing Notes not exchanged for new notes, the Subordinated Intercompany Note and the Subordinated Subsidiary Guarantors Guaranties); provided that we may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Consolidated Leverage Ratio would be greater than zero and less than 5.0 to 1.0. Notwithstanding the foregoing, we and our Restricted Subsidiary (except as specified below) may Incur each and all of the following: (i) Indebtedness outstanding at any time that is Incurred to finance the purchase or construction of (and related launch, insurance and other costs with respect to) the Replacement Satellite; provided, however, that the amount of any such Indebtedness shall not exceed (x) $100,000,000 plus (y) the aggregate amount of all Excess Cash Flow Redemption Payments actually made as of such date plus (z) the amount of any Designated Equity Proceeds; except to the extent such amount of Designated Equity Proceeds is used as a basis to Incur Indebtedness pursuant to clause (viii) of this paragraph, to make Investments or to make Restricted Payments; provided further, that any such Indebtedness shall be Incurred contemporaneously with the purchase of the Replacement Satellite or within 60 days thereafter (or Incurred to refinance, renew or replace such Indebtedness); and provided further that, if such Indebtedness is Incurred to finance the construction of the Replacement Satellite, any such indebtedness shall be Incurred within 60 days after the completion of construction; (ii) Indebtedness owed (A) to us or (B) to any of our Restricted Subsidiaries; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to us or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness, other than Indebtedness Incurred under clause (ii), (iv), (vi) or (viii) of this paragraph, and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the new notes, the Subsidiary Guaranties or Indebtedness that is pari passu with, or subordinated in right of payment to, the new notes shall only be permitted under this clause (iii) if (A) in case the new notes or the Subsidiary Guaranties are refinanced in part or the Indebtedness to be refinanced is pari passu with the new notes or the Subsidiary Guaranties, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining new notes or the Subsidiary Guaranties, as the case may be, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the new notes or the Subsidiary Guaranties, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the new notes or the Subsidiary Guaranties at least to the extent that the Indebtedness to be refinanced is subordinated to the new notes or the Subsidiary Guaranties, as the case may be, and (C) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the 72 Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; (iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided that such agreements (a) are designed solely to protect us or our Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (b) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder, and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guaranties or letters of credit, surety bonds or performance bonds securing any of our obligations or the obligations of any of our Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guaranties of Indebtedness Incurred by any person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by us or any Restricted Subsidiary in connection with such disposition; (v) our Indebtedness, to the extent the net proceeds thereof are promptly (A) used to purchase new notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the new notes as described below under "Defeasance"; (vi) Guaranties of the new notes and Guaranties of our Indebtedness by any Restricted Subsidiary provided the Guaranty of such Indebtedness is permitted by and made in accordance with the "Issuance of Guaranties by New Restricted Subsidiaries" covenant described below; (vii) Indebtedness not to exceed $5,000,000 at any time outstanding Incurred to finance the cost (including the cost of design, development, construction, installation, improvement, transportation or integration) of equipment (other than satellites) or inventory acquired by us or any Restricted Subsidiary after the Closing Date; (viii) our Indebtedness not to exceed, at any one time outstanding, the amount of Net Cash Proceeds received by us after the Closing Date from Designated Equity Proceeds, except to the extent such amount of Designated Equity Proceeds is used as a basis to Incur Indebtedness pursuant to clause (i) of this paragraph or to make Investments or to make Restricted Payments provided that such Indebtedness does not mature prior to Stated Maturity of the new notes and has an Average Life longer than the new notes; and (ix) indemnification obligations by us and our Restricted Subsidiaries in favor of former Subsidiaries ("Transferred Subsidiaries") of us transferred pursuant to the Data Business Transfer against amounts (including guarantee payments) paid or expenses incurred by such Transferred Subsidiaries under their Guaranties of the existing notes. (b) Notwithstanding any other provision of this "Limitation on Indebtedness" covenant, the maximum amount of Indebtedness that we or a Restricted Subsidiary may incur pursuant to this "Limitation on Indebtedness" covenant shall not be deemed to be exceeded, with respect to any outstanding Indebtedness, due solely to the result of fluctuations in the exchange rates of currencies and (ii) we and each Subsidiary Guarantor may not Incur any Indebtedness other than Acquired Indebtedness that is expressly subordinated to any of our other Indebtedness or Indebtedness of such Subsidiary Guarantor, as the case may be, unless such Indebtedness, by its terms or the terms of any agreement or instrument pursuant to which such Indebtedness is outstanding, is also expressly made subordinate to the new notes or the Subsidiary Guaranty of such Subsidiary Guarantor, as the case may be, at least to the extent that such Indebtedness is subordinated to such other Indebtedness; provided that the limitation in this clause (ii) shall not apply to distinctions between categories of unsubordinated Indebtedness which exist by reason of (a) any liens or other encumbrances arising or created in respect of some but not all 73 unsubordinated Indebtedness, (b) intercreditor agreements between holders of different classes of unsubordinated Indebtedness or (c) different maturities or prepayment provisions. (c) For purposes of determining any particular amount of Indebtedness under this "Limitation on Indebtedness" covenant, Guaranties, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included. For purposes of determining compliance with this "Limitation on Indebtedness" covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, we, in our sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. (d) In the event that we or any Restricted Subsidiary shall repay any Indebtedness (other than the new notes) pursuant to clause (i)(A) of the "Limitation on Asset Sales" covenant, the aggregate amount of Indebtedness which may otherwise be Incurred under clause (viii) of paragraph (a) of this covenant shall be reduced by the amount of such repayment. We shall designate how much of such reduction shall be applied to each such clause. LIMITATION ON RESTRICTED PAYMENTS (a) We will not, and will not permit any Restricted Subsidiary, directly or indirectly, to: (i) declare or pay any dividend or make any distribution on or with respect to its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiaries' net income from the first day of the fiscal quarter beginning immediately following the Closing Date) held by persons other than us or any of our Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for value any shares of our Capital Stock or the Capital Stock of any Guarantor or any Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by persons other than us and our Wholly Owned Subsidiaries, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of our Indebtedness that is subordinated in right of payment to the new notes or Indebtedness of any Subsidiary Guarantor that is subordinated to the Subsidiary Guaranties (other than, in each case, the purchase, repurchase or the acquisition of Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in any case due within one year of the date of acquisition), or (iv) make any Investment, other than a Permitted Investment, in any person; (such payments or any other actions described in clauses (i) through (iv) being collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) an Event of Default shall have occurred and be continuing, (B) except with respect to Investments in Restricted Subsidiaries and dividends on the Common Stock of any Subsidiary Guarantor paid to us or a Restricted Subsidiary, we could not Incur at least $1.00 of Indebtedness under the first sentence of paragraph (a) of the "Limitation on Indebtedness" covenant or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) made after the Closing Date (after giving pro forma effect to the proposed Restricted Payment) shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by us or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a 74 cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter immediately following the Closing Date and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed pursuant to the "Commission Reports and Reports to Holders" covenant plus (2) the aggregate Designated Equity Proceeds received by us after the Closing Date; except to the extent such amount of Designated Equity Proceeds is used as a basis to Incur Indebtedness pursuant to clause (i) or (viii) of paragraph (a) under the "Limitation on Indebtedness" covenant described above, plus (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to us or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Adjusted Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by us or any Restricted Subsidiary in such person or Unrestricted Subsidiary. (b) The foregoing provision shall not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration thereof if, at said date of declaration, such payment would comply with the foregoing paragraph (a); (ii) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the new notes including premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of paragraph (a) of the "Limitation on Indebtedness" covenant; (iii) the repurchase, redemption or other acquisition of our Capital Stock (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of our Capital Stock (other than Disqualified Stock); (iv) [intentionally omitted]; (v) payments or distributions, to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of the new notes indenture applicable to mergers, consolidations and transfers of all or substantially all of our property and assets; (vi) [intentionally omitted]; and (vii) Investments to the extent the amount invested consists solely of an amount of Designated Equity Proceeds received within six months of the Investment, except to the extent such amount of Designated Equity Proceeds was used as a basis to Incur Indebtedness pursuant to clause (i) or (viii) of paragraph (a) under the "Limitation on Indebtedness" covenant described above or to make Restricted Payments; provided that, except in the case of clauses (i) and (iii), no Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein. Each Restricted Payment permitted pursuant to the preceding paragraph (b) (other than the Restricted Payment referred to in clause (ii) thereof and an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) thereof) and the Net Cash Proceeds from any issuance of Capital Stock referred to in clause (iii) shall be included in calculating whether the conditions of clause (C) of the first paragraph of this "Limitation on Restricted Payments" covenant have been met with respect to any subsequent Restricted Payments. Any Restricted Payments made other than in cash shall be valued at fair market value. The amount of any Investment "outstanding" at any time shall be deemed to be equal to the amount of such 75 Investment on the date made, less the return of capital to us and our Restricted Subsidiaries with respect to such Investment (up to the amount of such Investment on the date made). LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES We will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except: (i) to us or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law; (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, provided any Investment in such person remaining after giving effect to such issuance or sale would have been permitted to be made under the "Limitation on Restricted Payments" covenant, if made on the date of such issuance or sale; and (iv) issuances or sales of Common Stock of any Restricted Subsidiary, the Net Cash Proceeds of which are promptly applied pursuant to clause (A) or (B) of the "Limitation on Asset Sales" covenant described below; provided that at no time may a Restricted Subsidiary, the Common Stock of which has been issued or sold pursuant to this clause (iv), be the owner of a satellite. ISSUANCES OF GUARANTIES BY NEW RESTRICTED SUBSIDIARIES We will provide to the trustee, on the date that any person becomes a Restricted Subsidiary, a supplemental indenture to the new notes indenture, executed by such new Restricted Subsidiary, providing for a full and unconditional guaranty on a senior basis by such new Restricted Subsidiary of our obligations under the new notes and the new notes indenture to the same extent as that set forth in the new notes indenture; provided that, in the case of any new Restricted Subsidiary that becomes a Restricted Subsidiary through the acquisition of a majority of its voting Capital Stock by us or any other Restricted Subsidiary, such guaranty may be subordinated to the extent required by the obligations of such new Restricted Subsidiary existing on the date of such acquisition that were not incurred in contemplation of such acquisition. A Subsidiary Guarantor shall be released from its Subsidiary Guaranty in the event all the Capital Stock of such Subsidiary Guarantor is sold in compliance with the provisions of the new notes indenture to a person other than us or another Restricted Subsidiary. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES We will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of our Capital Stock or with any Affiliate of ours or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to us or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to: (i) transactions (A) approved by a majority of the disinterested members of the Board of Directors or (B) for which we or a Restricted Subsidiary delivers to the trustee a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to us or such Restricted Subsidiary from a financial point of view; 76 (ii) any transaction solely between us and any of our Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of reasonable and customary regular fees to our directors who are not employees of ours; (iv) any payments or other transactions pursuant to any tax-sharing agreement between us and any other person with which we file a consolidated tax return or with which we are part of a consolidated group for tax purposes; (v) any Restricted Payments not prohibited by the "Limitation on Restricted Payments" covenant; (vi) Kingston's and Matra's rights to commissions and other payments under sales representation or ground operations agreements; Matra's rights to payments, including without limitation incentive payments, under the Telstar 11 Satellite Contract and Telstar 12 Satellite Contract; and Kingston's rights to payments for services under network monitoring contracts, in each case as in effect on the Closing Date and with such extensions, amendments and renewals that may be entered into on terms at least as favorable to us or our Restricted Subsidiaries, as the case may be, as the terms of agreements in effect on the Closing Date; or (vii) the Data Business Transfer or the issuance of the Subordinated Intercompany Note. Notwithstanding the foregoing, any transaction covered by the first paragraph of this "Limitation on Transactions with Shareholders and Affiliates" covenant and not covered by clauses (ii) through (vii) of this paragraph, the aggregate amount of which exceeds $5 million in value, must be approved or determined to be fair in the manner provided for in clause (i)(A) or (B) above. LIMITATION ON LIENS We will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on any of its assets or properties of any character, or any shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without making effective provision for all of the new notes and all other amounts due under the new notes indenture to be directly secured equally and ratably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the new notes, prior to) the obligation or liability secured by such Lien. The foregoing limitation does not apply to: (i) Liens existing on the Closing Date; provided that such Liens shall secure only those obligations which they secure on the Closing Date; (ii) Liens granted after the Closing Date on any of our assets or our Capital Stock or on our Restricted Subsidiaries created in favor of the holders of the new notes; (iii) Liens with respect to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary to us or a Wholly Owned Restricted Subsidiary to secure Indebtedness owing to us or such other Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (iii) of paragraph (a) of the "Limitation on Indebtedness" covenant; provided that such Liens do not extend to or cover any of our property or assets or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced; or (v) Permitted Liens. We will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on Telstar 11, Telstar 12 or Telstar 10 that secures Indebtedness, other than pursuant to clauses (vi) or (xxi) of the definition of Permitted Liens. 77 LIMITATION ON SALE-LEASEBACK TRANSACTIONS We will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any sale-leaseback transaction involving any of its assets or properties whether now owned or hereafter acquired, whereby we or a Restricted Subsidiary sells or transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which we or such Restricted Subsidiary, as the case may be, intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred. The foregoing restriction does not apply to any sale-leaseback transaction if (i) the lease is for a period, including renewal rights, of not in excess of three years; (ii) the lease constitutes Indebtedness and secures or relates to industrial revenue or pollution control bonds; (iii) the transaction is solely between us and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted Subsidiaries; or (iv) we or such Restricted Subsidiary, within twelve months after the sale or transfer of any assets or properties is completed, applies an amount not less than the net proceeds received from such sale in accordance with clause (A) or (B) of the first paragraph of the "Limitation on Asset Sales" covenant described below. LIMITATION ON ASSET SALES We will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale unless (i) such sale is made on an arms-length basis and the consideration received by us or such Restricted Subsidiary (including the amount of any Released Indebtedness) is at least equal to the fair market value of the assets sold or disposed of, as determined (a) by the Board of Directors of the seller thereof or (b) if the purchase price for such Asset Sale equals or exceeds $10,000,000, a fairness opinion by a nationally recognized appraisal, accounting or investment banking firm addressed to us and delivered by us to the trustee and (ii) at least 85% of the consideration received (excluding the amount of any Released Indebtedness) consists of cash or Temporary Cash Investments or any property or assets that are referred to in clause (B) of this paragraph. In the event and to the extent that the Net Cash Proceeds received by us or any of our Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of ours and our subsidiaries has been filed pursuant to the "Commission Reports and Reports to Holders" covenant), then we shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay our unsubordinated Indebtedness or the unsubordinated Indebtedness of any Restricted Subsidiary owing to a person other than us or any of our Restricted Subsidiaries or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within twelve months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, ours and our Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of this "Limitation on Asset Sales" covenant. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this "Limitation on Asset Sales" covenant totals at least $10 million, we must commence, not later than the 15th Business Day of such month, and consummate an Offer to Purchase from the holders on a pro rata basis an aggregate principal amount of new notes equal 78 to the Excess Proceeds on such date, at a purchase price equal to 101% of the principal amount of the new notes, plus accrued interest (if any) to the Payment Date. INSURANCE The new notes indenture will provide that we will maintain (a) in-orbit insurance with respect to Telstar 11, Telstar 12 and Telstar 10 in an amount at least equal to the cost to replace such satellite with a satellite of comparable or superior technological capability (as estimated by the Board of Directors) and having at least as much transmission capacity as such satellite, and (b) with respect to each other satellite to be launched by us or any Restricted Subsidiary and each replacement satellite therefor, (i) launch insurance with respect to each such satellite covering the period from the launch of such satellite to 180 days following such launch in an amount equal to or greater than the sum of (A) the cost to replace such satellite pursuant to the contract pursuant to which a replacement satellite will be constructed, (B) the cost to launch a replacement satellite pursuant to the contract pursuant to which a replacement satellite will be launched and (C) the cost of launch insurance for such satellite or, in the event that we have reason to believe that the cost of obtaining comparable insurance for a replacement satellite would be materially higher, our best estimate of the cost of such comparable insurance and (ii) at all times subsequent to 180 days after the launch (if it is a Successful Launch) of each such satellite, in-orbit insurance in an amount at least equal to the cost to replace such satellite with a satellite of comparable or superior technological capability (as estimated by the Board of Directors) and having at least as much transmission capacity as such satellite was designed to have. The in-orbit insurance required by this paragraph shall provide that, if 50% or more of a satellite's initial capacity is lost, the full amount of insurance will become due and payable, and that, if a satellite is able to maintain more than 50% but less than 90% of its initial capacity, a pro-rata portion of such insurance will become due and payable. The insurance required by this paragraph shall name us and/or any Subsidiary Guarantor as the sole loss payee or payees, as the case may be, thereof. In the event that we (or a Subsidiary Guarantor) receive proceeds from insurance relating to any satellite, we (or a Subsidiary Guarantor) may use a portion of such proceeds to repay any vendor or third-party purchase money financing pertaining to such satellite (other than Telstar 11) that is required to be repaid by reason of the loss giving rise to such insurance proceeds. We (or a Subsidiary Guarantor) may use the remainder of such proceeds to acquire, develop, construct, launch and insure a replacement satellite (including components for a related ground spare) if (i) such replacement satellite is of comparable or superior technological capability as compared with the satellite being replaced and has at least as much transmission capacity as the satellite being replaced and (ii) we will have sufficient funds to service our projected debt service requirements until the scheduled launch of such replacement satellite and for one year thereafter and to acquire, develop, construct, launch and insure (in the amounts required by the preceding paragraph) such replacement satellite, provided that such replacement satellite is scheduled to be launched within 26 months of the receipt of such proceeds. Any such proceeds not used as permitted by this paragraph shall be applied, within 90 days, to reduce our Indebtedness or shall constitute Excess Proceeds for purposes of the "Limitation on Asset Sales" covenant. REPURCHASE OF NEW NOTES UPON A CHANGE OF CONTROL We must commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all new notes then outstanding, at a purchase price equal to 101% of the outstanding principal amount of the new notes, plus accrued interest (if any) to the Payment Date. There can be no assurance that we will have sufficient funds available at the time of any Change of Control to make any debt payment (including repurchases of new notes) required by the foregoing covenant (as well as may be contained in other securities of ours which might be outstanding at the time). The above covenant requiring us to repurchase the new notes will, unless consents are obtained, require us to repay all indebtedness then outstanding which by its terms would prohibit such new note repurchase, either prior to or concurrently with such new note repurchase. 79 REPLACEMENT SATELLITE Prior to the purchase or construction of the Replacement Satellite, we shall provide to the trustee, a written opinion from an independent party qualified in making such determination that the purchase price or construction cost, as the case may be, of the Replacement Satellite is consistent with then prevailing market prices for comparable satellites. BUSINESS ACTIVITIES We will not, and we will not permit any Restricted Subsidiary to, engage in any business other than (i) any of the lines of business conducted by us and our Restricted Subsidiaries on the Closing Date, including the ownership and operation of geosynchronous satellites through which we and our Restricted Subsidiaries provide fixed satellite services such as video distribution and other satellite transmission services such as transmission capacity for cable and television programmers, news and information networks, telecommunications companies, internet service providers and other carriers for a variety of applications, and (ii) any business reasonably related thereto. PAYMENTS FOR CONSENT We will not, and will not permit any of our Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of the new notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Loral Space Guaranty or the new notes unless such consideration is offered to be paid and is paid to all holders of the new notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. RATING We shall use our best efforts from the Closing Date to obtain a rating from Moody's or, if no such rating can be so obtained from Moody's, S&P, with respect to the new notes. COMMISSION REPORTS AND REPORTS TO HOLDERS Whether or not we are required to file reports with the Commission, we shall file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Securities Exchange Act of 1934 if it were subject thereto. We shall supply the trustee and each holder or shall supply to the trustee for forwarding to each such holder, without cost to such holder, copies of such reports and other information. EVENTS OF DEFAULT The following events will be defined as "Events of Default" in the new notes indenture: (a) default in the payment of principal of (or premium, if any, on) any new note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) default in the payment of interest on any new note when the same becomes due and payable, and such default continues for a period of 30 days; (c) default in the performance or breach of the provisions of the new notes indenture applicable to mergers, consolidations and transfers of all or substantially all of our assets or the failure to make or consummate an Offer to Purchase in accordance with the "Limitation on Asset Sales" or "Repurchase of New Notes Upon a Change of Control" covenant; (d) we default in the performance of or breach any other covenant or agreement of ours in the new notes indenture or under the new notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written 80 notice by the trustee or the holders of 25% or more in aggregate principal amount of the new notes; (e) there occurs with respect to (A) any issue or issues of our Indebtedness, any Subsidiary Guarantor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such persons, whether such Indebtedness now exists or shall hereafter be created or (B) the TT&C Financing or any refinancing thereof which is secured by substantially the same collateral, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against us, any Subsidiary Guarantor or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect us, any Subsidiary Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of ours, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of our property and assets, any Subsidiary Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of our affairs or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; (h) we, any Subsidiary Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of ours, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of our property and assets, any Subsidiary Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; (i) any Notes Guaranty shall cease to be, or shall be asserted in writing by us or any Guarantor not to be, in full force and effect or enforceable in accordance with their respective terms; or (j) the occurrence of an Event of Default described under "Description of Loral Space Guaranty -- Events of Default." If an Event of Default (other than an Event of Default specified in clause (g) or (h) above that occurs with respect to us or an Event of Default of the type described in clause (g) under "Description of Loral Space Guaranty -- Events of Default" with respect to Loral Space) occurs and is continuing under the new notes indenture, the trustee or the holders of at least 25% in aggregate principal amount of the new notes then outstanding, by written notice to us (and to the trustee if such notice is given by the holders), may, and the trustee at the request of such holders shall, declare the principal amount of, premium, if any, and accrued interest on such new notes to be immediately due and payable. Upon a declaration of acceleration, such principal amount, premium, if any, and accrued interest shall be 81 immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by us or the relevant Guarantor or Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (g) or (h) above occurs with respect to us or an Event of Default of the type described in clause (g) under "Description of Loral Space Guaranty -- Events of Default" occurs with respect to Loral Space, the principal amount of, premium, if any, and accrued interest on the new notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the trustee or any holder. In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on our behalf with the intention of avoiding payment of the premium that we would have had to pay if we then had elected to redeem the new notes pursuant to the optional redemption provisions of the new notes indenture, an equivalent Make Whole Premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the new notes. The holders of at least a majority in principal amount of the outstanding new notes by written notice to us and to the trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the new notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. For information as to the waiver of defaults, see "Modification and Waiver." The holders of at least a majority in aggregate principal amount of the outstanding new notes may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. However, the trustee may refuse to follow any direction that conflicts with law or the new notes indenture, that may involve the trustee in personal liability, or that the trustee determines in good faith may be unduly prejudicial to the rights of holders of new notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from holders of such new notes. A holder may not pursue any remedy with respect to the new notes indenture or the new notes unless: (i) the holder gives the trustee written notice of a continuing Event of Default; (ii) the holders of at least 25% in aggregate principal amount of outstanding new notes make a written request to the trustee to pursue the remedy; (iii) such holder or holders offer the trustee indemnity satisfactory to such trustee against any costs, liability or expense; (iv) the trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the holders of a majority in aggregate principal amount of the outstanding new notes do not give the trustee a direction that is inconsistent with the request. However, such limitations do not apply to the right of any holder of a new note to receive payment of the principal of, premium, if any, or interest on, such new note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the new notes, which right shall not be impaired or affected without the consent of the holder. The new notes indenture will require certain of our officers to certify, on or before a date not more than 90 days after the end of each fiscal year, that a review has been conducted of our activities and of the activities of our Restricted Subsidiaries and our and our Restricted Subsidiaries' performance under the new notes indenture and that we have fulfilled all obligations thereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. We will also be obligated to notify the trustee of any default or defaults in the performance of any covenants or agreements under the new notes indenture. 82 MERGER, CONSOLIDATION AND SALE OF ASSETS Each of us and each Subsidiary Guarantor will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any person or permit any person to merge with or into us or any Subsidiary Guarantor unless: (i) we or any Subsidiary Guarantor, as the case may be, shall be the continuing person, or the person (if other than us or any Subsidiary Guarantor) formed by such consolidation or into which we or any Subsidiary Guarantor, as the case may be, is merged or that acquired or leased such property and assets of ours or any Subsidiary Guarantor, as the case may be, shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the trustee, all of our obligations or the obligations of any Subsidiary Guarantor, as the case may be, on all of the new notes and under the new notes indenture; (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (iii) if such transaction involves us or any Significant Subsidiary thereof, immediately after giving effect to such transaction on a pro forma basis, we, or any person becoming the successor obligor on the new notes shall have a Consolidated Net Worth equal to or greater than our Consolidated Net Worth immediately prior to such transaction; (iv) if such transaction involves us or any Significant Subsidiary thereof, immediately after giving effect to such transaction on a pro forma basis, we, or any person becoming the successor obligor of the new notes, as the case may be, could Incur at least $1.00 of Indebtedness under the first sentence of paragraph (a) of the "Limitation on Indebtedness" covenant; provided that this clause (iv) shall not apply to a consolidation or merger with or into a Wholly Owned Restricted Subsidiary with a positive net worth; provided that, in connection with any such merger or consolidation, no consideration (other than Common Stock in the surviving person or us) shall be issued or distributed to our stockholders; and (v) We or the Subsidiary Guarantor, as the case may be, deliver to the trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with; provided, however, that clauses (iii) and (iv) above do not apply if, in the good faith determination of our Board of Directors, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of our incorporation; and provided further that any such transaction shall not have as one of its purposes the evasion of the foregoing limitations. Upon any consolidation or merger, or any sale, conveyance, transfer or other disposition of all or substantially all of the property and assets of us or any Subsidiary Guarantor, as the case may be, in accordance with the foregoing requirements, the successor person formed by such consolidation or into which we or such Subsidiary Guarantor is merged or to which such sale, conveyance, transfer or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, us or such Subsidiary Guarantor under the new notes indenture with the same effect as if such successor person had been named as us or such Subsidiary Guarantor in the new notes indenture, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the new notes indenture and the new notes. 83 DEFEASANCE Defeasance and Discharge. The new notes indenture will provide that we will be deemed to have paid and will be discharged from any and all obligations in respect of the new notes, on the 123rd day after the deposit referred to below, and the provisions of the new notes indenture will no longer be in effect with respect to such new notes (except for, among other matters, certain obligations to register the transfer or exchange of such new notes, to replace stolen, lost or mutilated new notes, to maintain paying agencies and to hold monies for payment in trust) if, among other things, (A) we have deposited with the trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the relevant new notes on the Stated Maturity of such payments in accordance with the terms of the new notes indenture and new notes, (B) we have delivered to the trustee (i) either (x) an Opinion of Counsel to the effect that holders will not recognize income, gain or loss for federal income tax purposes as a result of our exercise of our option under this "Defeasance" provision and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must be based upon (and accompanied by a copy of) a ruling of the Internal Revenue Service to the same effect unless there has been a change in applicable federal income tax law after the Closing Date such that a ruling is no longer required or (y) a ruling directed to the trustee received from the Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (ii) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940 and, after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, (C) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which we, any of our Subsidiaries or Loral Space is a party or by which we, or any of our Subsidiaries is bound, and (D) if at such time the new notes are listed on a national securities exchange, we have delivered to the trustee an Opinion of Counsel to the effect that the new notes will not be delisted as a result of such deposit, defeasance and discharge. If our obligations are discharged as provided above, the obligations of all Guarantors will also be discharged. Defeasance of Certain Covenants and Certain Events of Default. The new notes indenture further will provide that its provisions will no longer be in effect with respect to clauses (iii) and (iv) under "Merger, Consolidation and Sale of Assets" and all the covenants described herein under "Covenants," clauses (c) and (d) under "Events of Default" with respect to such clauses (iii) and (iv) under "Merger, Consolidation and Sale of Assets" and such covenants and clauses (e) and (f) under "Events of Default" shall be deemed not to be Events of Default, upon, among other things, the deposit with the trustee, in trust, of money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the new notes on the Stated Maturity of such payments in accordance with the terms of the new indenture and new notes, the satisfaction of the provisions described in clauses (B)(ii), (C) and (D) of the preceding paragraph and the delivery by us to the trustee of an Opinion of Counsel to the effect that, among other things, the holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. If the foregoing occurs, the analogous provisions of the Loral Space Guaranty will no longer be in effect or constitute Loral Space Events of Default. Defeasance and Certain Other Events of Default. In the event we exercise our option to omit compliance with certain covenants and provisions of the new notes indenture with respect to the new notes 84 as described in the immediately preceding paragraph and such new notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money and/or U.S. Government Obligations on deposit with the trustee will be sufficient to pay amounts due on such new notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on such new notes at the time of the acceleration resulting from such Event of Default. However, we will remain liable for such payments. MODIFICATION AND WAIVER Modifications and amendments of the new notes indenture, including the Loral Space Guaranty may be made by us, the Guarantors and the trustee with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding new notes; provided, however, that no such modification or amendment may, without the consent of each holder affected thereby, (i) change the Stated Maturity of the principal of, or any installment of interest on, any new note, (ii) reduce the principal amount of, or premium, if any, or interest on, any new note, (iii) change the place or currency of payment of principal of, or premium, if any, or interest on, any new note, (iv) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the Redemption Date) of any new note, (v) reduce the above-stated percentage of outstanding new notes the consent of whose holders is necessary to modify or amend the new notes indenture, (vi) waive a default in the payment of principal of, premium, if any, or interest on the new notes, (vii) release the Guarantors from the Notes Guaranties, except pursuant to the express provisions of the new notes indenture (see "Covenants -- Issuances of Guaranties by New Restricted Subsidiaries") or (viii) reduce the percentage or aggregate principal amount of outstanding new notes, the consent of whose holders is necessary for waiver of compliance with certain provisions of the new notes indenture or for waiver of certain defaults. NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR EMPLOYEES The new notes indenture provides that no recourse for the payment of the principal of, premium, if any, or interest on any of the new notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of ours in the new notes indenture or in any of the new notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person of ours or any Guarantor or of any successor person thereof. Each holder, by accepting the new notes, waives and releases all such liability. CONCERNING THE TRUSTEE The new notes indenture provides that, except during the continuance of a Default, the trustee will not be liable, except for the performance of such duties as are specifically set forth in the new notes indenture. If an Event of Default has occurred and is continuing, the trustee will use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The new notes indenture and provisions of the Trust Indenture Act of 1939, as amended, incorporated by reference therein contain limitations on the rights of the trustee, should they become creditors of ours, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The trustee are permitted to engage in other transactions; provided, however, that, if they acquire any conflicting interest, they must eliminate such conflict or resign. CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES The descriptions of the operations and procedures of The Depository Trust Company ("DTC") set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the DTC settlement system and are subject to change by DTC from time to time. 85 Neither we nor the exchange agent take any responsibility for these operations or procedures, and investors are urged to contact the DTC system or its Participants directly to discuss these matters. DTC has advised us that it is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its Participants (collectively, the "Participants") and facilitates the clearance and settlement of securities transactions between Participants through electronic book-entry changes to the accounts of its Participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Investors who are not Participants may beneficially own securities held by or on behalf of DTC only through Participants or Indirect Participants. We expect that under the procedures established by DTC upon deposit of each Global Note, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Note and ownership of such Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of Participants) and the records of Participants and the Indirect Participants (with respect to the interests of persons other than Participants). The laws of some jurisdictions may require that in order to effectively transfer interests in securities to certain persons, such persons must take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the new notes represented by a Global Note to such persons may be limited. In addition, because DTC can act only on behalf of its Participants, who in turn act on behalf of persons who hold interests through Participants, the ability of a person having an interest in new notes represented by a Global Note to pledge or transfer such interest to persons or entities that do not participate in DTC's system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest. So long as DTC or its nominee is the registered owner of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the new notes represented by the Global Note for all purposes under the new notes indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have new notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Notes, and will not be considered the owners or holders thereof under the new notes indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee thereunder. Accordingly, each holder owning a beneficial interest in a Global Note must rely on the procedures of DTC and, if such holder is not a Participant or an Indirect Participant, on the procedures of the Participant through which such holder owns its interest, to exercise any rights of a holder of new notes under the new notes indenture with respect to such Global Note. We understand that under existing industry practice, in the event that we request any action of holders of new notes, or a holder that is an owner of a beneficial interest in a Global Note desires to take any action that DTC, as the holder of such Global Note, is entitled to take, DTC would authorize the Participants to take such action and the Participants would authorize holders owning through such Participants to take such action or would otherwise act upon the instruction of such holders. DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the 86 relevant security as shown on the records of DTC. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of new notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such new notes. Payments with respect to the principal of, and premium, if any, and interest on, any new notes represented by a Global Note registered in the name of DTC or its nominee on the applicable record date will be payable by our paying agent to or at the direction of DTC or its nominee in its capacity as the registered holder of the Global Note representing such new notes under the new notes indenture. Initially, the trustee will act as paying agent and Registrar. Under the terms of the new notes indenture, we and our paying agent may treat the persons in whose names the new notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we, nor the trustee, nor any paying agent has or will have any responsibility or liability for the payment of such amounts to owners of beneficial interests in a Global Note (including principal, premium, if any, liquidated damages, if any, and interest). Payments by the Participants and the Indirect Participants to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of the Participants or the Indirect Participants and DTC. Transfers between Participants in DTC will be effected in accordance with DTC's procedures. Neither the company nor the trustee will have any responsibility for the performance by DTC or its Participants or Indirect Participants of their obligations under the rules and procedures governing DTC's operations. SAME-DAY SETTLEMENT AND PAYMENT All payments of principal and interest with respect to the new notes will be made by wire transfer immediately available funds to the accounts specified by the Global Note Holder. Secondary trading in long-term notes and notes of corporate issuers is generally settled in clearinghouse or next-day funds. In contrast, the Global Notes are expected to trade in DTC's Same-Day Funds Settlement System until maturity, and secondary market trading activity in the Global Notes will therefore be required by DTC to settle in immediately available funds. Secondary trading in Certificated Notes will also be required to be settled in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the new notes. CERTIFICATED NOTES The Global Notes will be exchanged for new notes of like tenor and an equal aggregate principal amount, in authorized denominations and in definitive form, if (A) (i) DTC notifies us that it is unwilling or unable to continue as Depositary or (ii) we determine that DTC is unable to continue as Depositary and, in either case, we fail to appoint a successor Depositary within 90 days, (B) we determine that such new notes shall no longer be represented by Global Notes and we execute and deliver to the trustee instructions to such effect or (C) an Event of Default or event which, with notice or lapse of time or both, would constitute an Event of Default with respect to the new notes, and which entitles the holders of the new notes to accelerate the new notes' maturity, shall have occurred and be continuing. Certificated Notes issued in exchange for a Global Note shall be registered upon prior written notice given to the trustee by or on behalf of DTC in accordance with the new notes indenture. It is expected that such instructions may be based upon directions received by DTC from Participants or Indirect Participants with respect to ownership of beneficial interests in Global Notes. Upon any such issuance, the trustee is required to register such definitive new notes in the name of such person or persons (or the nominee of any thereof) and cause the same to be delivered thereto. Neither we nor the trustee shall be liable for any delay by DTC or any Participant or Indirect Participant in identifying the beneficial owners of the related new notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the new notes to be issued). 87 DESCRIPTION OF LORAL SPACE GUARANTY The following is a summary of the terms of the Loral Space Guaranty that Loral Space proposes to provide in this exchange offer. The terms of the Loral Space Guaranty will be contained in either the new notes indenture or a separate guaranty agreement. Loral Space will guaranty our obligations under the new notes, including the payment of principal and interest on a direct, unsecured and senior basis. The Loral Space Guaranty: - will be equal in right of payment with any existing and future unsubordinated indebtedness Loral Space incurs, including Indebtedness under its 9 1/2% Senior Notes due 2006; - will be effectively junior in right of payment to all indebtedness and liabilities (including trade payables) of Loral Space's subsidiaries, including Loral SpaceCom and Loral Satellite; and - will be senior in right of payment to all of Loral Space's existing and future subordinated indebtedness, including Loral Space's subordinated guaranty of the $29.7 million subordinated intercompany note issued to Loral SpaceCom in connection with this exchange offer. This section is only a summary of the material provisions of the Loral Space Guaranty. This section, however, does not purport to be complete and does not restate the Loral Space Guaranty in its entirety. A copy of the Loral Space Guaranty has been filed with the SEC as an exhibit to the registration statement of which this prospectus is a part. We urge you to read the Loral Space Guaranty because the Loral Space Guaranty and not this description defines your rights as holders of the Loral Space Guaranty. You may obtain copies of the Loral Space guaranty agreement from us. See "Where You Can Find More Information." This section uses defined terms. See "Certain Definitions." As used in this Description of Loral Space Guaranty, the term "Loral Space" refers to Loral Space & Communications Ltd. and the term "Loral Space Guaranty" refers to the Guaranty, pursuant to the new notes indenture by Loral Space of our obligations under the new notes indenture and the new notes. COVENANTS In the Loral Space Guaranty, Loral Space will be subject to certain restrictions that limit its and its Restricted Subsidiaries' ability to: (1) pay dividends; (2) acquire Equity Interests of Loral Space or any of its Restricted Subsidiaries; (3) redeem Indebtedness of Loral Space which is junior in right of payment to the notes; (4) make Restricted Investments; (5) incur Indebtedness; (6) issue Preferred Stock of its Restricted Subsidiaries; (7) create Liens; (8) engage in sale and leaseback transactions; (9) with respect to its Restricted Subsidiaries, pay dividends, make loans or advances to Loral Space or any other Restricted Subsidiary or transfer any of its property or assets to Loral Space or any other Restricted Subsidiary; (10) make Asset Sales; (11) with respect to Loral Space, consolidate or merge with or into another Person or sell all or substantially all of the properties or assets of Loral Space and its Restricted Subsidiaries, taken as a whole, to another Person; (12) enter into transactions with Affiliates; and 88 (13) with respect to any of its Restricted Subsidiaries, guarantee or pledge any assets to secure the payment of any other Indebtedness of Loral Space. The above limitations are "restrictive covenants" that are promises that Loral Space makes to you about how Loral Space will run its business, or business actions that Loral Space promises not to take. A more detailed description of the restrictive covenants and the exceptions to them follows below. ASSET SALES Loral Space will not, and will not permit any Restricted Subsidiary to, consummate an Asset Sale unless: (1) Loral Space (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) such fair market value is (a) determined by two officers of Loral Space if the fair market value is less than $25 million or (b) determined by Loral Space's Board of Directors and evidenced by a resolution of the Board of Directors if the fair market value is $25 million or greater, and, in each case, such fair market value is set forth in an Officers' Certificate delivered to the trustee; and (3) at least 75% of the consideration therefor received by Loral Space or such Restricted Subsidiary is in the form of cash or Cash Equivalents. Only for purposes of this clause (3), each of the following shall be deemed to be cash: (a) any liabilities (as shown on Loral Space's or such Restricted Subsidiary's most recent balance sheet), of Loral Space or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms junior in right of payment to the Loral Space Guaranty of the new notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Loral Space or such Restricted Subsidiary from further liability; (b) any securities, notes or other obligations received by Loral Space or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by Loral Space or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion); (c) any assets described in clause (2)or (4) of the next succeeding paragraph; (d) Marketable Securities; and (e) Designated Other Permitted Consideration; provided that the aggregate fair market value (as determined above) of such Designated Other Permitted Consideration, taken together with the fair market value at the time of receipt of all other Designated Other Permitted Consideration received pursuant to this clause (e), less the amount of net cash proceeds previously realized in cash from prior Designated Other Permitted Consideration is less than 5% of Loral Space's Consolidated Tangible Assets at the time of the receipt of such Designated Other Permitted Consideration (with the fair market value of each item of Designated Other Permitted Consideration being measured at the time received and without giving effect to subsequent changes in value). Within 360 days after the receipt of any Net Proceeds from an Asset Sale, Loral Space may apply (or, in the case of clause (2), (3) or (4) below, enter into a binding commitment to apply) such Net Proceeds: (1) to repay Indebtedness of Loral Space or any Restricted Subsidiary which is not junior in right of payment to the Loral Space Guaranty of the new notes; 89 (2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business or to purchase Equity Interests of a Restricted Subsidiary from another Person; (3) to make a capital expenditure in a Permitted Business or to make an Investment in a Permitted Venture; or (4) to acquire or to acquire the right to use other long-term assets that are used or useful in a Permitted Business. Pending the final application of any such Net Proceeds, Loral Space may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by the Loral Space Guaranty. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the second preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, Loral Space will make, or cause Loral CyberStar to make, an Offer to Purchase to all holders of new notes and all holders of other Indebtedness that is equal in right of payment with the Loral Space Guaranty of the new notes containing provisions similar to those set forth in the Loral Space Guaranty with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of new notes and such other Indebtedness which is equal in right of payment to the Loral Space Guaranty of the new notes that may be purchased out of the Excess Proceeds. The offer price in any Offer to Purchase to the holders of the new notes will be equal to 101% of principal amount plus accrued and unpaid interest, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Offer to Purchase, Loral Space may use such Excess Proceeds for any purpose not otherwise prohibited by the Loral Space Guaranty. If the aggregate principal amount of new notes and such other Indebtedness which is equal in right of payment to the Loral Space Guaranty of the new notes tendered into such Offer to Purchase exceeds the amount of Excess Proceeds, the trustee shall select the new notes and such other Indebtedness which is equal in right of payment to the Loral Space Guaranty of the new notes to be purchased on a proportional basis based on the principal amount of new notes and such other Indebtedness which is equal in right of payment to the Loral Space Guaranty of the new notes tendered. Upon completion of each Offer to Purchase, the amount of Excess Proceeds shall be reset at zero. Loral Space will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of new notes pursuant to an Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of the Loral Space Guaranty, Loral Space will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the Loral Space Guaranty by virtue of such conflict. RESTRICTED PAYMENTS Loral Space will not, and will not permit any Restricted Subsidiary to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of Loral Space's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any distribution, dividend or payment in connection with any merger or consolidation involving Loral Space or any of its Restricted Subsidiaries) or to the direct or indirect holders of Loral Space's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Loral Space or to Loral Space or a Restricted Subsidiary of Loral Space); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving Loral Space) any Equity Interests of Loral Space, any Restricted Subsidiary of Loral Space or any direct or indirect parent of Loral Space; 90 (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is junior in right of payment to the Loral Space Guaranty of the new notes, except the scheduled payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Loral Space Default or Loral Space Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) Loral Space would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to either test set forth in the first paragraph of the covenant described under "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by Loral Space and its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (2), (3), (4) and (6) of the next succeeding paragraph) is less than the sum, without duplication, of: (a) 50% of the Consolidated Net Income of Loral Space for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of Loral Space's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus (b) 100% of the aggregate net cash proceeds received by Loral Space since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of Loral Space (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of Loral Space that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of Loral Space), except to the extent such net cash proceeds are used to increase the amount of dividends on Preferred Stock of Loral Space or the amount of Restricted Investments that may be made pursuant to clause (7) of the next succeeding paragraph; plus (c) 100% of the fair market value (as determined by Loral Space's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the trustee) of assets used or useful in a Permitted Business received by Loral Space since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of Loral Space (other than Disqualified Stock); plus (d) to the extent not already included in Consolidated Net Income of Loral Space for such period, if any Restricted Investment that was made by Loral Space or any Restricted Subsidiary after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment or designated amount of Unrestricted Subsidiary; plus 91 (e) to the extent that any Unrestricted Subsidiary is designated by Loral Space as a Restricted Subsidiary after the Issue Date, an amount equal to the lesser of (A) the net book value of Loral Space's Investment in such Unrestricted Subsidiary at the time of such designation; and (B) the fair market value of Loral Space's Investment in such Unrestricted Subsidiary at the time of such designation. The preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the foregoing paragraph; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any Indebtedness junior in right of payment to the Loral Space Guaranty or of any Equity Interests of Loral Space or any Restricted Subsidiary in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a subsidiary of Loral Space) of, Equity Interests of Loral Space (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of Indebtedness of Loral Space junior by its terms in right of payment to senior Indebtedness of Loral Space with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend or distribution by a Restricted Subsidiary of Loral Space to the holders of its common Equity Interests so long as Loral Space or such Restricted Subsidiary receives at least its proportional share (and in like form) of such dividend or distribution in accordance with its common Equity Interests; (5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Loral Space or any Restricted Subsidiary of Loral Space held by any employee of Loral Space or a Restricted Subsidiary or member of Loral Space's (or any of its Restricted Subsidiaries') management pursuant to any equity subscription agreement or stock option agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $10 million; (6) the purchase by a Restricted Subsidiary of shares of Capital Stock of Loral Space from Loral Space or the deemed repurchase of Capital Stock by Loral Space or a Restricted Subsidiary on the exercise of stock options; (7) payments of dividends by Loral Space on Preferred Stock of Loral Space or the making of Restricted Investments by Loral Space or any Restricted Subsidiary in an aggregate amount not to exceed 100% of the aggregate net cash proceeds received by Loral Space since the Issue Date from the issue or sale of Equity Interests of Loral Space (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such dividend payment or Restricted Investment shall be excluded from clause (3)(b) of the immediately preceding paragraph; (8) the purchase by Loral Space or a Restricted Subsidiary of Equity Interests in a Restricted Subsidiary from another Person; (9) scheduled dividends payable on the Series C Preferred Stock; (10) payment of dividends on Preferred Stock of a Restricted Subsidiary; and (11) other Restricted Payments in an aggregate principal amount not to exceed $25 million; 92 provided that Loral Space will not and will not permit any of its Restricted Subsidiaries to make any Restricted Payment contemplated by clauses (2) through (10) above so long as a Loral Space Default has occurred and is continuing. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued to or by Loral Space or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be either (a) determined by the Board of Directors whose resolution with respect thereto shall be delivered to the trustee, or (b) based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of international standing if the fair market value exceeds $25 million. Not later than the date of making any Restricted Payment, Loral Space shall deliver to the trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this "Restricted Payments" covenant were computed, together with a copy of any fairness opinion or appraisal required by the Loral Space Guaranty. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK Loral Space will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and Loral Space will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that Loral Space or any Restricted Subsidiary may incur Indebtedness (including Acquired Debt), and Loral Space may issue Disqualified Stock, and any Restricted Subsidiary may issue Preferred Stock, if, after giving effect to the incurrence of such Indebtedness or the issuance of such Disqualified Stock or Preferred Stock and the application of the proceeds thereof, no Loral Space Default would occur as a consequence of such incurrence or issuance or be continuing following such incurrence or issuance and either (1) the Consolidated Leverage Ratio of Loral Space would be less than 5.0 to 1.0, or (2) Loral Space's Consolidated Capital Ratio as of the most recent available quarterly or annual balance sheet is less than 2.0 to 1.0. The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by Loral Space and its Restricted Subsidiaries of additional Indebtedness and letters of credit pursuant to Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed $850 million as of such date of incurrence less the aggregate amount of all Net Proceeds of Asset Sales applied to repay term Indebtedness outstanding under one or more Credit Facilities pursuant to clause (1) of the second paragraph of the covenant described under "Asset Sales"; (2) the incurrence by Loral Space and its Restricted Subsidiaries of Existing Indebtedness; (3) the incurrence by Loral Space of Indebtedness represented by the Loral Space Guaranty of the new notes to be issued on the Issue Date and Loral Space's 9 1/2% Senior Notes due 2006; (4) the issuance by a Subsidiary of Preferred Stock or the incurrence by Loral Space's Subsidiaries of Non-Recourse Debt (including Acquired Debt that constitutes Non-Recourse Debt); provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of a Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of Loral Space that was not permitted by this clause (4); 93 (5) the incurrence by Loral Space or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the Loral Space Guaranty to be incurred under the first paragraph of this covenant or clause (2), (3) or (5) of this paragraph; (6) the incurrence by Loral Space or any of its Restricted Subsidiaries of intercompany Indebtedness between or among Loral Space and any of its Restricted Subsidiaries; provided, however, that: (a) if Loral Space is the obligor on such Indebtedness, such Indebtedness must be expressly junior in right of payment to all Obligations with respect to the Loral Space Guaranty of the new notes; and (b)(1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Loral Space or a Restricted Subsidiary thereof, and (2) any sale or other transfer of any such Indebtedness to a Person that is not either Loral Space or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by Loral Space or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by Loral Space or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk or currency exchange rate risk; (8) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock or Preferred Stock in the form of additional shares of the same class of Disqualified Stock or Preferred Stock, as the case may be, will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or Preferred Stock for purposes of this covenant; (9) the incurrence by Loral Space or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (9), not to exceed $50 million; or (10) the incurrence by Restricted Subsidiaries of Guarantees of Indebtedness of Loral Space or any Restricted Subsidiary that is not junior in right of payment to the Loral Space Guaranty of the new notes. Loral Space will not incur any Indebtedness (including Permitted Debt) that is contractually junior in right of payment to any other Indebtedness of Loral Space unless such Indebtedness is also contractually junior in right of payment to the Loral Space Guaranty of the new notes on substantially identical terms; provided, however, that no Indebtedness of Loral Space shall be deemed to be contractually junior in right of payment to any other Indebtedness of Loral Space solely by virtue of being unsecured. For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (10) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, Loral Space will be permitted to classify such item of Indebtedness on the date of its incurrence in any manner that complies with this covenant. 94 LIENS Loral Space will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens. SALE AND LEASEBACK TRANSACTIONS Loral Space will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that Loral Space or any Restricted Subsidiary may enter into a sale and leaseback transaction if: (1) Loral Space or such Restricted Subsidiary, as applicable, could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the covenant described above under "-- Incurrence of Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described under "-- Liens"; (2) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the trustee, of the property that is the subject of such sale and leaseback transaction; and (3) the transaction complies with the covenant described above under the caption "Asset Sales." DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES Loral Space will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to Loral Space or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Loral Space or any of its Restricted Subsidiaries; (2) make loans or advances to Loral Space or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to Loral Space or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness as in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the Issue Date; (2) any customary (as conclusively determined in good faith by the Chief Financial Officer of Loral Space) encumbrance or restriction applicable to Loral Space or a Restricted Subsidiary that is contained in an agreement or instrument governing or relating to Indebtedness of Loral Space or Indebtedness contained in any Credit Facilities or Indebtedness incurred pursuant to clause (4) of the second paragraph of the covenant entitled "-- Incurrence of Indebtedness and Issuance of Preferred Stock", provided that, other than with respect to Preferred Stock of a Subsidiary or Non-Recourse Debt of a Subsidiary (including Non-Recourse Debt that is Acquired Debt), such encumbrances and restrictions permit the distribution of funds to Loral 95 Space in an amount sufficient for Loral Space to make the timely payment of interest, premium (if any), Liquidated Damages (if any) and principal (whether at stated maturity, by way of a sinking fund applicable thereto, by way of any mandatory redemption, defeasance, retirement or repurchase thereof, including upon the occurrence of designated events or circumstances or by virtue of acceleration upon an event of default, or by way of redemption or retirement at the option of the holder of the Indebtedness, including pursuant to offers to purchase) according to the terms of the Loral Space Guaranty and other Indebtedness that is solely an obligation of Loral Space, but provided further that such agreement may nevertheless contain customary (as so determined) net worth, leverage, invested capital and other financial covenants, customary (as so determined) covenants regarding the merger of or sale of all or any substantial part of the assets of Loral Space or any Restricted Subsidiary, customary (as so determined) restrictions on transactions with affiliates and customary (as so determined) subordination provisions governing Indebtedness owed to Loral Space or any Restricted Subsidiary; (3) the Credit Agreement as in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Credit Agreement, as in effect on the Issue Date; (4) the Loral Space Indenture and the notes issued thereunder; (5) applicable law; (6) any instrument governing Indebtedness or Capital Stock of a Person acquired by Loral Space or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Loral Space Guaranty to be incurred; (7) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (8) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (3) of the preceding paragraph; (9) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (10) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (11) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to such Lien; (12) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business; and (13) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. 96 MERGER, CONSOLIDATION OR SALE OF ASSETS Loral Space will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not Loral Space is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of Loral Space and its Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person, unless: (1) either: (a) Loral Space is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than Loral Space) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of Bermuda, the United States, any state thereof or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than Loral Space) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of Loral Space under the Loral Space Guaranty pursuant to agreements reasonably satisfactory to the trustee; (3) immediately after such transaction no Loral Space Default exists; and (4) Loral Space or the Person formed by or surviving any such consolidation or merger or to which such sale, assignment, transfer, conveyance or other disposition shall have been made (if other than Loral Space): (a) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of Loral Space immediately preceding the transaction; and (b) will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period or balance sheet date, as applicable, be permitted to incur at least $1.00 of additional Indebtedness pursuant to at least one of the tests set forth in the first paragraph of the covenant described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock." In addition, Loral Space may not, directly or indirectly, lease all or substantially all of its properties or assets in one or more related transactions, to any other Person. When a successor corporation assumes all of the obligations of its predecessor under the Loral Space Guaranty, the predecessor will be released from those obligations. This "Merger, Consolidation or Sale of Assets" covenant will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among Loral Space and any of its Restricted Subsidiaries. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Loral Space Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by Loral Space and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of the covenant described under "-- Restricted Payments" or reduce the amount available for future Investments under one or more clauses of the definition of Permitted Investments, as Loral Space shall determine. That designation will only be permitted if such Investment would be 97 permitted at that time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Loral Space Default. Loral SpaceCom Corporation, Space Systems/Loral, Loral Orion and Loral CyberStar will initially be Restricted Subsidiaries under the Loral Space Guaranty; SatMex, Europe*Star, Globalstar and Globalstar Telecommunications Limited will initially be Permitted Ventures under the Loral Space Guaranty. TRANSACTIONS WITH AFFILIATES Loral Space will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to Loral Space or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Loral Space or such Restricted Subsidiary with an unrelated Person; and (2) Loral Space delivers to the trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15 million, either (a) a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors or (b) an opinion as to the fairness to the holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of international standing. The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject, except as set forth below, to the provisions of the prior paragraph: (1) any employment agreement entered into by Loral Space or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of Loral Space or such Restricted Subsidiary, as the case may be; (2) transactions between or among Loral Space and/or its Restricted Subsidiaries; (3) any sale or other issuance of Equity Interests (other than Disqualified Stock) of Loral Space; (4) payment of reasonable directors fees to Persons who are not otherwise Affiliates of Loral Space; (5) Restricted Payments that are permitted by, and Permitted Investments that are not prohibited by, the provisions of the Loral Space Guaranty described under "-- Restricted Payments"; and (6) transactions between Loral Space and/or its Restricted Subsidiaries, on the one hand, and a Permitted Venture, on the other hand, provided that the condition set forth in clause (1) of the prior paragraph is satisfied. LIMITATIONS ON ISSUANCES OF GUARANTIES OF INDEBTEDNESS Loral Space will not permit any of its Restricted Subsidiaries, directly or indirectly, to Guaranty or pledge any assets to secure the payment of any other Indebtedness of Loral Space unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture or other agreement providing for the Guaranty of the payment of the new notes by such Restricted Subsidiary (a "Guarantor"), which Guaranty shall (1) be senior to or equal to in right of payment with such Restricted Subsidiary's Guaranty of or pledge to secure such other Indebtedness and 98 (2) remain in effect for so long as the Guaranty or pledge to secure such other Indebtedness remains in effect. No Guarantor will incur any Indebtedness (including Permitted Debt) that is contractually junior in right of payment to any other Indebtedness of such Guarantor unless such Indebtedness is also contractually junior in right of payment to such Guarantor's Guaranty of the new notes on substantially identical terms; provided, however, that no Indebtedness of a Guarantor shall be deemed to be contractually junior in right of payment to any other Indebtedness of such Guarantor solely by virtue of being unsecured. BUSINESS ACTIVITIES Loral Space will not, and will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to the extent as would not be material to Loral Space and its Restricted Subsidiaries, taken as a whole. PAYMENTS FOR CONSENT Loral Space will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of the new notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Loral Space Guaranty or the new notes unless such consideration is offered to be paid and is paid to all holders of the new notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. REPORTS Whether or not required by the SEC, so long as any new notes are outstanding, Loral Space will furnish to the holders of new notes, within the time periods specified in the SEC's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K (or any successor forms) if Loral Space were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of Loral Space and its subsidiaries and, with respect to the annual information only, a report on the annual financial statements by Loral Space's certified independent accountants; and (2) all current reports that would be required to be filed with the SEC on Form 8-K (or any successor form) if Loral Space were required to file such reports. If Loral Space has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by this covenant shall include selected financial information, either on the face of the financial statements or in the footnotes thereto, regarding the financial condition and results of operations of Loral Space and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of Loral Space. In addition, whether or not required by the SEC, Loral Space will file a copy of all information and reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. ADDITIONAL AMOUNTS All payments in respect of the Loral Space Guaranty will be made free and clear of, and without withholding or deduction for, any present or future taxes, duties, assessments or governmental charges of whatever nature (collectively, "Taxes") imposed, levied, collected, withheld or assessed by or within any jurisdiction in which Loral Space is then incorporated (or the jurisdiction of incorporation of any successor 99 of Loral Space) or any other jurisdiction in which Loral Space (or Loral Space's successor) are resident for tax purposes or any political subdivision or taxing authority thereof or therein (the "relevant jurisdiction"), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction in respect of such payment is so required, Loral Space, or any successor, will pay those Additional Amounts as will result in receipt by each holder of the new notes of the gross amount as would have been received by the holder or the beneficial owner with respect to the new notes, as applicable, had no such withholding or deduction (including any withholding or deduction applicable to Additional Amounts payable) been required, except that no Additional Amounts will be payable for or on account of: (1) Taxes that would not have been imposed but for: (a) the existence of any present or former connection between a holder or a beneficial owner (or between a fiduciary, settler, beneficiary, member or shareholder of, or possessor of a power over, a holder, if the holder is an estate, trust, partnership or corporation) and the relevant jurisdiction, including if this holder (or such fiduciary, settler, beneficiary, member, shareholder or possessor) is or has been a national, domiciliary or resident of or treated as a resident thereof or having been present or engaged in a trade or business therein or having had a permanent establishment therein; or (b) Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (or any successor provision); (2) any estate, inheritance, gift, sale, transfer or similar tax, assessment or other governmental charge; (3) any Tax that is imposed or withheld by reason of a holder's failure or a beneficial owner's failure to timely comply with Loral Space's request, addressed to the holder (a) to provide reasonably required or requested information concerning the holder's nationality, residence or identity or those of a beneficial owner or (b) to make any reasonably required or requested declaration, filing or claim or satisfy any reasonably required or requested information or reporting requirement, which, in the case of (a) or (b), is required or imposed by statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax; provided, however, that (i) providing information required by IRS Form W-9 and the appropriate Form W-8, and any successors thereto and (ii) the execution and delivery of such forms is deemed to be reasonably required or requested; or (4) any combination of (1),(2) and (3); nor shall Additional Amounts be paid with respect to payment of the principal of or any premium or interest on any such new note, to any holder (including any fiduciary or partnership) to the extent that the beneficial owner would not have been entitled to such Additional Amounts had it been the holder of the new note. Where required by applicable law, Loral Space or any paying agent, as the case may be, will also (a) make such withholding or deduction in respect of any Taxes and (b) remit the full amount withheld or deducted to the relevant authority in accordance with applicable law. Loral Space will furnish to each holder, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts satisfactory to the Trustee evidencing such payment by Loral Space. Whenever there is mentioned in any context the payment of principal of or any premium or interest on, or in respect of, a new note, or the net proceeds received from Loral Space on the sale or exchange of any new note, such mention shall be deemed to include mention of the payment of Additional Amounts 100 provided for in the new notes indenture to the extent that, in such context, Additional Amounts are, were, or would be payable in respect thereof pursuant to the Loral Space Guaranty. Loral Space will pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges, or similar levies that arise in any jurisdiction from the execution, delivery, enforcement or registration of the Loral Space Guaranty or any other document or instrument relating thereto, or the receipt of any payments with respect to the new notes, excluding such taxes, charges, or similar levies imposed by any jurisdiction outside of any jurisdiction in which Loral Space or the paying agent are located or incorporated (except those resulting from or required to be paid in connection with, the enforcement of the notes or any other such document or instrument following the occurrence of any event of default with respect to the new notes), and has agreed to indemnify each holder for any such taxes paid by the holder. The foregoing obligations shall survive any termination, defeasance or discharge of the Loral Space Guaranty. EVENTS OF DEFAULT Each of the following is a Loral Space Event of Default: (1) [intentionally omitted] (2) [intentionally omitted] (3) failure by Loral Space to comply with the provisions described under "Merger, Consolidation or Sale of Assets"; (4) failure by Loral Space for 30 days after notice to comply with the provisions described under "-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (5) failure by Loral Space or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in the Loral Space Guaranty; (6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Loral Space or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Loral Space or any of its Restricted Subsidiaries) whether such Indebtedness or guaranty now exists, or is created after the Issue Date, if that default: (a) is caused by a failure to pay principal at maturity of such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $25 million or more; (7) failure by Loral Space or any of its Subsidiaries to pay final judgments aggregating in excess of $25 million, which judgments are not paid, discharged or stayed for a period of 60 days; and (8) certain events of bankruptcy or insolvency with respect to Loral Space or any of its Significant Subsidiaries. Loral Space is required to deliver to the trustee annually a statement regarding compliance with the Loral Space Guaranty. Upon becoming aware of any Loral Space Default, Loral Space is required to deliver to the trustee a statement specifying such Loral Space Default. 101 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of Loral Space, as such, shall have any liability for any obligations of Loral Space under the Loral Space Guaranty of the new notes, the new notes indenture, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of new notes by accepting a new note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the new notes. The waiver may not be effective to waive liabilities under the U.S. federal securities laws. MODIFICATION AND WAIVER See "Description of the New Notes -- Modification and Waiver." DEFEASANCE The Loral Space Guaranty will contain provisions providing for defeasance of obligation of Loral Space under the Loral Space Guaranty. See "Description of the New Notes -- Defeasance." CERTAIN DEFINITIONS Set forth below are certain defined terms used in Loral Space Guaranty. Reference is made to the Loral Space Guaranty for a full statement of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "ACQUIRED DEBT" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "ASSET SALE" means: (1) the sale, lease, transfer, conveyance or other disposition of any assets or rights, other than sales of inventory in the ordinary course of business consistent with past practices; provided that the sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of Loral Space and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Loral Space Guaranty described under "-- Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and (2) the issuance of Equity Interests in any of Loral Space's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that: (a) involves assets having a fair market value of less than $5 million; or (b) results in net proceeds to Loral Space and its Restricted Subsidiaries of less than $5 million; 102 (2) a transfer of assets between or among Loral Space and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary to Loral Space or to another Restricted Subsidiary; (4) the sale or lease of satellites, transponders or other equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; (6) a Restricted Payment or Permitted Investment that is permitted by the covenant described under "-- Restricted Payments"; and (7) the issuance of partnership interests by CyberStar, L.P. pursuant to participation bonuses in accordance with Section 4.3 of the CyberStar partnership agreement. "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The term "beneficially owns" shall have a corresponding meaning. "BOARD OF DIRECTORS" means the Board of Directors of Loral Space. "BUSINESS DAY" means each day which is not a Legal Holiday. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight 103 bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having one of the two highest ratings obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition; (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition; and (7) the Goldman Sachs US$ Liquid Reserves Fund and other funds with substantially similar investment policies. "CODE" means the Internal Revenue Code of 1986, as amended. "CONSOLIDATED CAPITAL RATIO" of any Person as of any date means the ratio of (1) the Total Indebtedness of such Person then outstanding to (2) the stockholders' equity as of such date as shown on the consolidated balance sheet of such Person in accordance with GAAP (which, in the case of Loral Space, shall include the Series C Preferred Stock) after giving pro forma effect to (a) the incurrence of any Indebtedness proposed to be incurred or the issuance of any Disqualified Stock proposed to be issued and the receipt and application of the proceeds thereof, (b) any other Indebtedness incurred, Disqualified Stock issued or preferred stock of any Subsidiary issued or the repayment or retirement of any of the foregoing since such balance sheet date and the receipt and application of the proceeds thereof, (c) any asset dispositions or asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that has occurred since such balance sheet date, in each case as if they had occurred and such proceeds had been applied on the date of such balance sheet. "CONSOLIDATED CASH FLOW" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant 104 to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, amounts in respect of items (1), (2) and (4) for a Restricted Subsidiary of Loral Space shall be added to Consolidated Net Income to compute Consolidated Cash Flow of Loral Space only to the extent that a corresponding percentage of the Consolidated Net Income of such Restricted Subsidiary would be permitted at the date of determination to be dividended to Loral Space by such Restricted Subsidiary without prior approval (that has not been obtained) pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED LEVERAGE RATIO" means the ratio of (1) the Total Indebtedness of Loral Space outstanding as of the most recent available quarterly or annual balance sheet to (2) the Consolidated Cash Flow of Loral Space for the four full fiscal quarters next preceding the incurrence of such Indebtedness or the issuance of such Disqualified Stock for which consolidated financial statements are available; provided that pro forma effect shall be given to (a) the incurrence of any Indebtedness proposed to be incurred or the issuance of any Disqualified Stock proposed to be issued and the receipt and application of the proceeds thereof, (b) any other Indebtedness incurred, Disqualified Stock issued or preferred stock of any Subsidiary issued or the repayment or retirement of any of the foregoing since the beginning of such four fiscal quarter period and the receipt and application of the proceeds thereof and (c) any asset dispositions or asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that has occurred during such four fiscal quarter period, in each case as if they had occurred and such proceeds had been applied on the first day of such four fiscal quarter period. "CONSOLIDATED NET INCOME" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any 105 agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the specified person or one of its Subsidiaries; and (5) the cumulative effect of a change in accounting principles shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the sum of: (1) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date; plus (2) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of Preferred Stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such Preferred Stock. "CONSOLIDATED TANGIBLE ASSETS" of any Person means the total amount of assets (less applicable reserves and any other properly deductible items) which under GAAP would be included on a consolidated balance sheet of such Person and its Subsidiaries after deducting therefrom all goodwill (but not any other intangible assets) which under GAAP would be included on such consolidated balance sheet. "CREDIT AGREEMENT" means that certain Amended and Restated Credit and Participation Agreement among Loral SpaceCom Corporation, Space Systems/Loral, Inc., certain lending banks, Bank of America National Trust and Savings Association, as Administrative Agent, and Istituto Bancario San Paolo Di Torino S.P.A., individually and as Italian Export Financing Arranger and as Selling Bank, dated as of November 14, 1997, providing for up to $850 million of credit extensions, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "CREDIT FACILITIES" means one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "DESIGNATED OTHER PERMITTED CONSIDERATION" means the fair market value of non-cash consideration received by Loral Space or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Other Permitted Consideration pursuant to an Officers' Certificate, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a sale of such Designated Other Permitted Consideration. "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require Loral Space to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that Loral Space may not repurchase or redeem any such Capital Stock pursuant to such 106 provisions unless such repurchase or redemption complies with the covenant described under "-- Restricted Payments." "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended (or any successor act) and the rules and regulations thereunder. "GLOBALSTAR" means Globalstar, L.P., a Delaware limited partnership. "GTL" means Globalstar Telecommunications Limited, a Bermuda limited partnership. "EXISTING INDEBTEDNESS" means Indebtedness of Loral Space and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the Issue Date, until such amounts are repaid. "EQUITY OFFERING" means any public or private sale of Equity Interests (other than Disqualified Stock) of Loral Space, other than private sales of Equity Interests to an Affiliate of Loral Space. "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by any such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "GUARANTY" means a guaranty other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements entered into in the ordinary course of business and consistent with past practices designed to protect such Person against fluctuations in interest rates or currency exchange rates. "INDEBTEDNESS" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent, in respect of: (1) borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit, excluding letters of credit supporting obligations under customer contracts until such letters of credit are drawn; (3) banker's acceptances; (4) Capital Lease Obligations; (5) the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. 107 The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness; and (3) in the case of an obligation under a Hedging Obligation (a) zero if such obligation has been incurred pursuant to clause (7) of the second paragraph of the covenant described under "-- Incurrence of Indebtedness and Issuance of Preferred Stock" or (b) the notional amount of such obligation if not incurred pursuant to such clause. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of direct or indirect loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided, however, that Investments shall not include any commercially reasonable (as determined in good faith by either the Board of Directors of Loral Space or senior management of Loral Space) extensions of credit to, or Investments made in, any Person in connection with the purchase or sale of satellites or satellite services. If Loral Space or any Restricted Subsidiary of Loral Space sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of Loral Space such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of Loral Space and is not a Permitted Venture, Loral Space shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described under "-- Restricted Payments." "ISSUE DATE" means the date on which notes under the Loral Space Indenture were originally issued, which was January 21, 1999. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "LIQUIDATED DAMAGES" means liquidated damages payable under the terms of the Loral Space Indenture. "LORAL SPACE DEFAULT" means any event that is, or with the passage of time or the giving of notice or both would be, a Loral Space Event of Default. "LORAL SPACE INDENTURE" means the indenture dated as of January 15, 1999 between Loral Space and The Bank of New York, as trustee, relating to Loral Space's 9 1/2% Senior Notes due 2006. "MARKETABLE SECURITIES" means, with respect to any Asset Sale, any readily marketable equity securities that are (1) traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market and 108 (2) issued by a corporation having a total equity market capitalization of not less than $250 million; provided that the excess of (a) the aggregate amount of securities of any one such corporation held by Loral Space and any Restricted Subsidiary over (b) ten times the average daily trading volume of such securities during the 20 immediately preceding trading days shall be deemed not to be Marketable Securities, as determined on the date of the contract relating to such Asset Sale. "NET INCOME" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by Loral Space or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness (other than Indebtedness under any one or more Credit Facilities) secured by a lien on the asset or assets that were the subject of such Asset Sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NON-RECOURSE DEBT" means Indebtedness as to which neither Loral Space nor any of its Restricted Subsidiaries (other than the Restricted Subsidiary that is the primary obligor and its Subsidiaries so long as no Capital Stock of such Subsidiaries is owned by Loral Space or any other Restricted Subsidiary), (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (2) is directly or indirectly liable as a guarantor or otherwise, or (3) constitutes the lender. "OBLIGATIONS" means any principal, premium if any, interest, penalties, fees, indemnifications, guarantees, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "PERMITTED BUSINESS" means any of the lines of business conducted by Loral Space and its Restricted Subsidiaries or its existing Permitted Ventures on the Issue Date and any other space or communication businesses and any business reasonably related thereto. "OFFER TO PURCHASE" means a written offer (the "Offer") sent by Loral Space by first class mail, postage prepaid, to each holder of new notes at its address appearing in the register for the new notes on the date of the Offer offering to purchase up to the principal amount of new notes specified in such Offer at the purchase price specified in such Offer (as determined pursuant to the Loral Space Guaranty). 109 Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which shall be, subject to any contrary requirements of applicable law, not less than 30 days or more than 60 days after the date of such Offer and a settlement date for purchase of Securities within five Business Days after the Expiration Date. Loral Space shall notify the Trustee at least 15 Business Days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of Loral Space's obligation to make an Offer to Purchase, and the Offer shall be mailed by Loral Space or, at Loral Space's request, by the Trustee in the name and at the expense of Loral Space. The Offer shall contain information concerning the business of Loral Space and its Subsidiaries which Loral Space in good faith believes will enable such holders of new notes to make an informed decision with respect to the Offer to Purchase (which at a minimum shall include (1) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to the Loral Space Guaranty (which requirements may be satisfied by delivery of such documents together with the Offer), (2) a description of material developments in Loral Space's business subsequent to the date of the latest of such financial statements referred to in clause (1) (including a description of the events requiring Loral Space to make the Offer to Purchase), (3) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring Loral Space to make the Offer to Purchase and (4) any other information required by applicable law to be included therein). The Offer shall contain all instructions and materials necessary to enable such holders to tender new notes pursuant to the Offer to Purchase. "OFFICER" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of Loral Space. "OFFICER'S CERTIFICATE" means a certificate signed by two Officers. "OPINION OF COUNSEL" means an opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, us, Loral Space, or the Trustee. "PERMITTED INVESTMENTS" means: (1) any Investment in Loral Space or in a Restricted Subsidiary of Loral Space; (2) any Investment in Cash Equivalents; (3) any Investment by Loral Space or any Restricted Subsidiary of Loral Space in a Person engaged in a Permitted Business, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of Loral Space; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Loral Space or a Restricted Subsidiary of Loral Space; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described under "-- Asset Sales;" (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Loral Space; (6) Hedging Obligations; (7) Investments in Permitted Ventures; (8) Investments existing on the Issue Date; 110 (9) Investments in Skybridge, L.P. that are either (a) required pursuant to the partnership agreement in existence on the Issue Date, or (b) required to avoid disproportionate dilution to Loral Space's equity interest therein pursuant to such partnership agreement or to avoid financial penalties; and (10) other Investments in any Person principally engaged in Permitted Businesses having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (10) at any time outstanding not to exceed 5% of Loral Space's Consolidated Tangible Assets. "PERMITTED LIENS" means: (1) Liens on assets of Loral Space or its Restricted Subsidiaries securing Indebtedness and other Obligations under Credit Facilities that were permitted by the Loral Space Guaranty to be incurred; (2) Liens in favor of Loral Space or any of its Restricted Subsidiaries; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with Loral Space or any Restricted Subsidiary of Loral Space; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Loral Space or the Restricted Subsidiary; (4) Liens on property existing at the time of acquisition thereof by Loral Space or any Restricted Subsidiary of Loral Space; provided that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (7) Liens existing on the Issue Date and Liens Loral Space or any Restricted Subsidiary are or may be obligated to create pursuant to agreements in existence on the Issue Date; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (9) Liens incurred in the ordinary course of business of Loral Space or any Restricted Subsidiary of Loral Space with respect to obligations that do not exceed $50 million at any one time outstanding; (10) other Liens incidental to the conduct of Loral Space's and its Restricted Subsidiaries' businesses or the ownership of their respective property not securing any Indebtedness, and which do not in the aggregate materially detract from the value of Loral Space's and its Restricted Subsidiaries' property when taken as a whole, or materially impair the use thereof in the operation of their respective businesses; and (11) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Loral Space or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, 111 refinance, renew, replace, defease or refund other Indebtedness of Loral Space or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable), of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all customary expenses incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is junior in right of payment to the Loral Space Guaranty of the new notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is junior in right of payment to, the Loral Space Guaranty of the new notes on terms at least as favorable to the Holders of the Loral Space Guaranty of the new notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by Loral Space or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERMITTED VENTURE" means: (1) a corporation, partnership or other entity other than a Subsidiary engaged in one or more Permitted Businesses in respect of which Loral Space or a Restricted Subsidiary (a) beneficially owns at least 20% of the Capital Stock of such entity, and (b) either is a party to an agreement providing for one or more parties to such agreement (which may or may not be Loral Space or a Subsidiary), or is a member of a group that, pursuant to the constituent documents of the applicable corporation, partnership or other entity, has the power, to direct the policies, management and affairs of such entity; or (2) Globalstar Telecommunications Limited ("Globalstar Telecommunications Limited"), so long as Globalstar, L.P. is a Permitted Venture and Globalstar Telecommunications Limited's principal asset consists of Equity Interests in Globalstar. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or agency or political subdivision thereof or any other entity. "PREFERRED STOCK" of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such Person that is not an Unrestricted Subsidiary. "SEC" means the Securities and Exchange Commission. "SERIES C PREFERRED STOCK" means Loral Space's 6% Series C Convertible Redeemable Preferred Stock due 2007. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated by the SEC, as such Regulation is in 112 effect on the Issue Date, using a percentage of 5% for such calculations instead of the percentage set forth therein. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBSIDIARY" means, with respect to any specified Person, any corporation, partnership, association or other business entity that would be required under GAAP to be consolidated in the financial statements of such Person or one or more of the other Subsidiaries of that Person (or a combination thereof). "TOTAL INDEBTEDNESS" means, at any time of determination, without duplication, the sum of (1) all Indebtedness of Loral Space and its Restricted Subsidiaries at such time, (2) the aggregate redemption price of any Disqualified Stock, and (3) the aggregate liquidation preference of any Preferred Stock of Loral Space's Restricted Subsidiaries, in each case as determined on a consolidated basis in accordance with GAAP. "UNRESTRICTED SUBSIDIARY" means any Subsidiary of Loral Space that is designated by the Board of Directors of Loral Space as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with Loral Space or any Restricted Subsidiary of Loral Space unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Loral Space or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Loral Space; (3) is a Person with respect to which neither Loral Space nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests, or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Loral Space or any of its Restricted Subsidiaries; and (5) has at least one director on its board of directors that is not a director or executive officer of Loral Space or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Loral Space or any of its Restricted Subsidiaries. Any designation of a Subsidiary of Loral Space as an Unrestricted Subsidiary shall be evidenced to the trustee by filing with the trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described under "-- Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Loral Space Guaranty and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Loral Space as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under "-- Incurrence of Indebtedness and Issuance of Preferred Stock," Loral Space shall be in default of such covenant. The Board of Directors of Loral Space may at any time designate any 113 Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Loral Space of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (1) such Indebtedness is permitted to be incurred under the covenant described under "-- Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period or balance sheet date, as applicable, and (2) no Loral Space Default would be in existence following such designation. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED SUBSIDIARY" of any specified Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. 114 DESCRIPTION OF THE LORAL SPACE WARRANTS The Loral Space warrants will be issued by Loral Space and will be governed by a warrant agreement to be entered into between Loral Space and The Bank of New York, as warrant agent, dated as of the closing date. The summary of the material provisions of the warrant agreement set forth below does not purport to be complete and is qualified in its entirety by reference to the warrant agreement, including the definition of certain terms therein. A copy of the form of warrant agreement has been filed with the Commission as an exhibit to the registration statement of which this prospectus is a part. GENERAL Tendering holders of existing notes tendered and accepted for exchange in the exchange offer will receive a pro rata share of warrants to purchase up to an aggregate of 6,657,096 shares of Loral Space common stock, par value $.01 per share. For every $1,000 principal amount of senior notes you tender, you will receive warrants to purchase 7.40 shares of common stock of Loral Space at the exercise price described below. For every $1,000 principal amount at maturity of senior discount notes you tender, you will receive warrants to purchase 6.98 shares of common stock of Loral Space at the exercise price described below. The number of warrants of Loral Space to be issued in the exchange offer to any holder will be rounded up to the nearest full warrant. The Loral Space warrants will be exercisable immediately and will expire on the fifth anniversary of the closing date. The exercise price of the Loral Space warrants will equal 110% of the average of the daily volume-weighted average trading prices of Loral Space common stock on the New York Stock Exchange (as reported by Bloomberg, L.P.) for the ten consecutive trading days preceding the second trading day before the closing of the exchange offer. The exercise price and the number of shares of Loral Space common stock issuable upon exercise of a Loral Space warrant are both subject to adjustments as described below. The Loral Space warrants will be publicly traded, and may be traded separately from the new notes. The Loral Space warrants may be exercised by surrendering to Loral Space the certificates evidencing the Loral Space warrants to be exercised together with the accompanying form of election to purchase, properly completed and executed, and with payment of the exercise price. Payment of the exercise price by a holder may be made in the form of cash or a certified or official bank check payable to the order of Loral Space. In the alternative, each warrant holder may exercise its right to receive warrant shares on a net basis, such that, without the exchange of funds, the holder of the warrants may receive the number of warrant shares otherwise issuable (or payable) upon exercise of its warrants less that number of warrant shares having an aggregate market price at the time of exercise equal to the aggregate exercise price that would otherwise have been paid by the holder of the warrant shares upon such exercise. Upon surrender of the Loral Space warrant certificate and payment of the exercise price, the warrant agent will deliver or cause to be delivered, to or upon the written order of such holder, stock certificates representing the number of shares of Loral Space common stock or other securities or property to which such holder is entitled under the Loral Space warrants and warrant agreement, including, without limitation, at Loral Space's option, cash payable to adjust for fractional interests in warrant shares issuable upon such exercise in an amount equal to the current market price (as defined in the warrant agreement) per share of Loral Space common stock, as determined on the day immediately preceding the date the Loral Space warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent. If less than all of the Loral Space warrants evidenced by a warrant certificate are to be exercised, a new warrant certificate will be issued for the remaining number of Loral Space warrants. No service charge will be made for registration of transfer or exchange upon surrender of any warrant certificate at the office of the warrant agent maintained for that purpose. Loral Space may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of warrant certificates. Until exercise, the holders of the Loral Space warrants have no right to vote on matters submitted to the stockholders of Loral Space or to receive notice of meetings of stockholders or any other rights of stockholders of Loral Space, including any right to receive cash dividends. The holders of the Loral Space 115 warrants have no preemptive rights and are not entitled to share in the assets of Loral Space in the event of the liquidation, dissolution or winding up of Loral Space's affairs. ADJUSTMENTS The number of shares of Loral Space common stock that may be purchased upon the exercise of the Loral Space warrants and the exercise price will both be subject to adjustment in certain events including (i) the payment by Loral Space of dividends (or other distributions) on common stock payable in shares of such common stock or other shares of Loral Space's capital stock, (ii) subdivisions, combinations and certain reclassifications of common stock, (iii) the issuance of common stock or of rights, options or warrants entitling the holder to subscribe for shares of common stock, or of securities convertible into or exchangeable for shares of common stock, for a consideration per share which is less than current market price, except in the case of bona fide public offerings and similar transactions, (iv) the distribution to all holders of common stock of any of Loral Space's assets, debt securities or any rights or warrants to purchase securities (excluding cash dividends or other cash distributions from current or retained earnings) (v) certain pro rata repurchases of common stock at prices in excess of current market prices and (vi) at the discretion of Loral Space's Board of Directors. In addition, the exercise price may be reduced in the event of purchase of shares of common stock pursuant to a tender or exchange offer made by Loral Space or any subsidiary thereof at a price greater than the current market price of the common stock at the time such tender or exchange offer expires. In the event of a taxable distribution to holders of common stock which results in an adjustment to the number of shares of common stock or other consideration for which a Loral Space warrant may be exercised, the holders of the Loral Space warrants may, in certain circumstances, be deemed to have received a distribution subject to United States Federal income tax as a dividend. See "Federal Income Tax Consequences." No adjustment in the exercise price will be required unless such adjustment would require an increase or decrease of at least $0.01 or one-hundredth ( 1/100) of a share, as the case may be; provided, however, that any adjustment which is not made will be carried forward and taken into account in any subsequent adjustment. In the case of certain stock splits, subdivisions, reclassifications, redesignations, reorganizations or changes in the number of outstanding shares of common stock and in the case of consolidations, mergers or share exchanges of Loral Space or the sale of all or substantially all of the assets of Loral Space, each Loral Space warrant shall thereafter be exercisable for the right to receive the kind and amount of shares of stock or other securities or property to which such holder would have been entitled as a result of such transactions had the Loral Space warrants been exercised immediately prior thereto. RESERVATION OF SHARES At the time of issuance of the Loral Space warrants, Loral Space will have authorized and reserved for issuance such number of shares of common stock as shall be initially issuable upon the exercise of the Loral Space warrants. Such shares of common stock, when paid for and issued must be duly and validly issued, fully paid and non-assessable, and not subject to any preemptive rights. AMENDMENT From time to time, Loral Space and the warrant agent, without the consent of the holders of the Loral Space warrants, may amend or supplement the warrant agreement for certain purposes, including, without limitation, curing defects or inconsistencies or making any change that does not, in the good faith opinion of Loral Space's Board of Directors, have an adverse effect on the rights of any holder. Other amendments or supplements to the warrant agreement generally require the written consent of the holders of a majority of the then outstanding Loral Space warrants. The consent of each holder of the Loral Space warrants affected shall be required for any amendment pursuant to which the exercise price would be increased or the number of warrant shares purchasable upon exercise of Loral Space warrants would be decreased. 116 REGISTRATION REQUIREMENTS Loral Space will use its reasonable best efforts to maintain the effectiveness of a registration statement with respect to the issuance of the shares of Loral Space common stock until the earlier of (i) such time as all Loral Space warrants have been exercised and (ii) the fifth anniversary of the closing date. During any consecutive 365-day period in which the Loral Space warrants are exercisable, Loral Space will have the ability to suspend the availability of such registration statement for up to two 30-consecutive-day periods (except during the 30 days immediately prior to the expiration of the Loral Space warrants) if Loral Space's Board of Directors determines in good faith that there is a valid purpose for the suspension and provides notice of such determination to the holders at their addresses appearing in the register of Loral Space warrants maintained by the warrant agent. REPORTS So long as any Loral Space warrants remain outstanding, and whether or not any new notes remain outstanding, Loral Space will cause copies of the reports and other documents described under "Description of Notes -- Commission Reports and Reports to Holders" to be filed with the warrant agent. THE PROPOSED AMENDMENTS The following is a description of the proposed amendments to certain restrictive covenants and certain events of default in provisions of the indentures governing the senior notes and senior discount notes, as amended to be made effective in accordance with Article Nine of the indentures. Holders of existing notes who desire to participate in the exchange offer must consent to the proposed amendments prior to 12:00 midnight, New York City time, on the expiration date. No holder of existing notes may participate in the exchange offer without consenting to the proposed amendments, either affirmatively or in the form of a consent to the proposed amendments contained in the letter of transmittal and consent. The proposed amendments, if approved, will be contained and reflected in a supplemental indenture. IF YOU TENDER YOUR EXISTING NOTES IN THE EXCHANGE OFFER, YOU ARE ALSO CONSENTING TO THE PROPOSED AMENDMENTS TO THE EXISTING NOTES INDENTURES DESCRIBED BELOW. IF THE PROPOSED AMENDMENTS BECOME EFFECTIVE, THE PROVISIONS SET FORTH IN THE FORM OF ITALICIZED CLAUSES BELOW WILL BE DELETED FROM THE INDENTURES. THE PROPOSED AMENDMENTS ALSO WOULD DELETE THOSE DEFINITIONS FROM THE INDENTURES THAT ARE USED ONLY IN PROVISIONS THAT WOULD BE ELIMINATED AS A RESULT OF THE PROVISIONS IN THE INDENTURES THAT HAVE BEEN DELETED AS A RESULT OF THE PROPOSED AMENDMENTS. THE INDENTURES WILL BE REVISED TO REFLECT SUCH DELETIONS. IN ADDITION, CERTAIN OTHER PROVISIONS IN THE INDENTURES WILL BE AMENDED, DELETED OR RENUMBERED AS IS APPROPRIATE IN LIGHT OF THE DELETIONS DESCRIBED BELOW. The provisions of the indentures, reprinted below, are qualified in their entirety by reference to the indentures. Capitalized terms that are used but not otherwise defined in this section have the same meanings as set forth in the indentures. SECTION 4.02. Issuances of Guaranties by New Restricted Subsidiaries. [delete: The Company will provide to the Trustee, on the date that any Person becomes a Restricted Subsidiary, a supplemental indenture to this Indenture, executed by such new Restricted Subsidiary, providing for a full and unconditional guarantee on a senior basis by such new Restricted Subsidiary of the Company's obligations under the Notes and this Indenture; provided that, in the case of any new Restricted Subsidiary that becomes a Restricted Subsidiary through the acquisition of a majority of its voting Capital Stock by the Company or any other Restricted Subsidiary, such guaranty may be subordinated to the extent required by the obligations of such new Restricted Subsidiary existing on the date of such acquisition that were not incurred in contemplation of such acquisition.] 117 SECTION 4.03. Limitation on Indebtedness. [delete: (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness existing on the Closing Date); provided that the Company may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Consolidated Leverage Ratio would be greater than zero and less than 6 to 1. Notwithstanding the foregoing, the Company and any Restricted Subsidiary (except as specified below) may Incur each and all of the following: (i) Indebtedness outstanding at any time that is (A) Incurred to finance the purchase, construction, launch, insurance for and other costs with respect to Orion 2 and Orion 3 or (B) in an aggregate principal amount not to exceed (1) until Orion 2 or Orion 3 has been successfully delivered in orbit, $50 million, (2) after the first of Orion 2 or Orion 3 has been successfully delivered in orbit, $100 million and (3) after the second of Orion 2 or Orion 3 has been successfully delivered in orbit, $150 million, in each case under this clause (i)(B); (ii) Indebtedness owed (A) to the Company or (B) to any of its Restricted Subsidiaries; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness, other than Indebtedness Incurred under clause (i)(B), (ii), (iv), (vi) or (viii) of this paragraph, and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the Notes, the Note Guaranty or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes shall only be permitted under this clause (iii) if (A) in case the Notes or the Note Guaranty is refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or the Note Guaranty, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or the Note Guaranty, as the case may be, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or the Note Guaranty, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or the Note Guaranty at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or the Note Guaranty, as the case may be, and (C) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; (iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided that such agreements (a) are designed solely to protect the Company or its Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (b) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guaranties or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary of the Company (other than Guaranties of Indebtedness Incurred by any Person acquiring all or any portion 118 of such business, assets or Restricted Subsidiary of the Company for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; (v) Indebtedness of the Company, to the extent the net proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the Notes as described in Section 8.02 of this Indenture; (vi) Guaranties of the Notes or the Senior Discount Notes and Guaranties of Indebtedness of the Company by any Restricted Subsidiary; (vii) Indebtedness Incurred to finance the cost (including the cost of design. development, construction, installation, improvement, transportation or integration) of equipment (other than Orion 2 or Orion 3) or inventory acquired by the Company or a Restricted Subsidiary after the Closing Date; (viii) Indebtedness of the Company not to exceed, at any one time outstanding, two times the Net Cash Proceeds received by the Company after the Closing Date from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person that is not a Subsidiary of the Company (less the amount of such proceeds applied as provided in clause (C)(2) of the first paragraph or clause (iii) or (iv) of the second paragraph of Section 4.04 of this Indenture); provided that such Indebtedness does not mature prior to the Stated Maturity of the Notes and has an Average Life longer than the Notes; and (ix) Redemption Indebtedness. (b) For purposes of determining any particular amount of Indebtedness under this Section 4.03, (1) Guaranties, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (2) any Liens granted pursuant to the equal and ratable provisions referred to in Section 4.08 of this Indenture shall not be treated as Indebtedness. For purposes of determining compliance with this Section 4.03, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, the Company, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. (c) In the event that the Company or any Restricted Subsidiary shall repay any Indebtedness (other than the Notes) pursuant to clause (i)(A) of Section 4.11 of this Indenture, the aggregate amount of Indebtedness which may otherwise be Incurred under clauses (i)(B) and (viii) of the second paragraph of paragraph (a) of this Section 4.03 shall be reduced by the amount of such repayment. The Company shall designate how much of such reduction shall be applied to each such clause. (d) Notwithstanding any other provision of this Section 4.03, (i) the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded due solely to fluctuations in the exchange rates of currencies and (ii) the Company and each Guarantor may not Incur any Indebtedness other than Acquired Indebtedness that is expressly subordinated to any other Indebtedness of the Company or such Guarantor, as the case may be, unless such Indebtedness, by its terms or the terms of any agreement or instrument pursuant to which such Indebtedness is outstanding, is also expressly made subordinate to the Notes or the Note Guaranty of such Guarantor, as the case may be, at least to the extent that such Indebtedness is subordinated to such other Indebtedness; provided that the limitation in this clause (ii) shall not apply to distinctions between categories of unsubordinated Indebtedness which exist by reason of (a) any liens or other encumbrances arising or created in respect of some but not all unsubordinated Indebtedness, (b) intercreditor agreements between holders of different classes of unsubordinated Indebtedness or (c) different maturities or prepayment provisions.] 119 SECTION 4.04. Limitation on Restricted Payments. [delete: The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or with respect to its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiaries' net income from the first day of the fiscal quarter beginning immediately following the Closing Date) held by Persons other than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company, any Guarantor or an Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by Persons other than the Company and its Wholly Owned Subsidiaries, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of the Company that is subordinated in right of payment to the Notes or of any Guarantor that is subordinated to the Note Guaranty (other than, in each case, the purchase, repurchase or the acquisition of Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in any case due within one year of the date of acquisition) or (iv) make any Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (i) through (iv) being collectively "Restricted Payments") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) an Event of Default shall have occurred and be continuing, (B) except with respect to Investments and dividends on the Common Stock of any Guarantor, the Company could not Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.03 or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) made after the Closing Date shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by the Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter immediately following the Closing Date and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed pursuant to Section 4.18 plus (2) the aggregate Net Cash Proceeds received by the Company or any Guarantor after the Closing Date from the issuance and sale permitted by the Indenture of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company or any Guarantor or from the issuance to a Person who is not a Subsidiary of the Company or any Guarantor of any options, warrants or other rights to acquire Capital Stock of the Company (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Notes), in each case except to the extent such Net Cash Proceeds are used to Incur Indebtedness pursuant to clause (viii) of the second paragraph under Section 4.03, plus (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Adjusted Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. The foregoing provision shall not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration thereof if, at such date of declaration, such payment would comply with the foregoing paragraph; 120 (ii) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Notes including premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (ix) of part (a) of Section 4.03; (iii) the repurchase, redemption or other acquisition of Capital Stock of the Company (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock (other than Disqualified Stock) of the Company; (iv) the making of any principal payment or the repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness of the Company which is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of, a substantially concurrent offering of, shares of the Capital Stock of the Company (other than Disqualified Stock); (v) payments or distributions, to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the Article Five; (vi) the repurchase, redemption or other acquisition of (A) shares of Series A Preferred Stock or Series B Preferred Stock which were outstanding on the Closing Date and (B) shares of Preferred Stock issued pursuant to options that were outstanding on the Closing Date, in exchange for, or out of the proceeds of, an issuance of Indebtedness Incurred under clause (iii) of Section 4.03; (vii) Investments to the extent the amount invested consists solely of Net Cash Proceeds received by the Company or any Guarantor, within six months of the making of such Investment, from the issuance and sale permitted by the Indenture of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company or any Guarantor; (viii) Investments, the sum of which does not exceed $5 million at any one time outstanding; (ix) cash payments, not to exceed $3 million, in lieu of the issuance of fractional shares of Capital Stock of the Company upon the exercise of the Warrants or any other warrants to buy, or upon the conversion of any securities convertible into, Capital Stock of the Company; (x) a one-time cash payment of up to $3 million to the holders of the Junior Subordinated Convertible Debentures in connection with the disposition of the Junior Subordinated Convertible Debentures in an underwritten public offering or private placement pursuant to Section 11.4 of the Debenture Purchase Agreement; and (xi) the purchase, redemption, retirement or other acquisition for value of Warrants pursuant to a Repurchase Offer; provided that, if the circumstances resulting in such Repurchase Offer constitute a Change of Control, the Company shall first have made the Offer to Purchase related to such Change of Control and shall have accepted and paid for all Notes tendered pursuant thereto; provided that, except in the case of clauses (i) and (iii), no Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein. Each Restricted Payment permitted pursuant to the preceding paragraph (other than the Restricted Payment referred to in clause (ii) thereof and an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or (iv) thereof) and the Net Cash Proceeds from any issuance of Capital Stock referred to in clauses (iii) and (iv) shall be included in calculating whether the conditions of clause (C) of the first paragraph of this Section 4.04 have been met with respect to any subsequent Restricted Payments. In the event the proceeds of an issuance of Capital Stock of the Company are used for the redemption, repurchase or other acquisition of the Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall be included in clause (C) of the first paragraph of this Section 4.04 only to the extent such proceeds are not, within six months, used for such redemption, repurchase or other acquisition of Indebtedness. Any Restricted Payments made other than in cash shall be valued at fair market value. The amount of any Investment "outstanding" at any time shall 121 be deemed to be equal to the amount of such Investment on the date made, less the return of capital to the Company and its Restricted Subsidiaries with respect to such Investment (up to the amount of such Investment on the date made).] SECTION 4.05. Limitation on the Use of Segregated Proceeds. [delete: On the Closing Date the Company shall segregate $272.9 million (the "Segregated Proceeds") of the aggregate proceeds from the issuance of the Notes and the Senior Discount Notes. If and for so long as the Notes or the Senior Discount Notes are rated below Baa3 by Moody's or below BBB- by Standard & Poors, the Company and its Restricted Subsidiaries will use the Segregated Proceeds (and any proceeds therefrom or return thereon) only to (i) invest in Temporary Cash Investments, (ii) make payments with respect to the purchase, construction, launch, insurance for and other costs related to additional satellites and (iii) to make payments of principal and interest on the Notes and the Senior Discount Notes.] SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries. [delete: The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except: (i) to the Company or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law; (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, provided any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 4.04, if made on the date of such issuance or sale; and (iv) issuances or sales of Common Stock of any Restricted Subsidiary, the Net Cash Proceeds of which are promptly applied pursuant to clause (i)(A) or (i)(B) of the second paragraph of Section 4.10 of this Indenture; provided that at no time may a Restricted Subsidiary, the Common Stock of which has been issued or sold pursuant to this clause (iv), be the owner of a satellite.] SECTION 4.07. Limitation on Transactions with Shareholders and Affiliates. [delete: The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or with any Affiliate of the Company or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to (i) transactions (A) approved by a majority of the disinterested members of the Board of Directors or (B) for which the Company or a Restricted Subsidiary delivers to the Trustees a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view, (ii) any transaction solely between the Company and any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries, (iii) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company, (iv) any payments or other transactions pursuant to any tax-sharing agreement between the Company and any other Person with which the Company files a consolidated tax return or with which the Company is part of a consolidated group for tax purposes, (v) any Restricted Payments not prohibited by Section 4.04 or (vi) Kingston's and Matra's rights to commissions and other payments under sales representation agreements, Matra's rights to payments, including without limitation incentive payments, 122 under the Orion 1 Satellite Contract and Orion 2 Satellite Contract, and Kingston's rights to payments for services under network monitoring contracts, in each case as in effect on the Closing Date and with such extensions, amendments and renewals that may be entered into on terms at least as favorable to the Company or its Restricted Subsidiaries, as the case may be, as the terms of agreements in effect on the Closing Date. Notwithstanding the foregoing, any transaction covered by the first paragraph of this Section 4.07 and not covered by clauses (ii) through (v) of this paragraph, the aggregate amount of which exceeds $5 million in value, must be approved or determined to be fair in the manner provided for in clause (i)(A) or (B) above.] SECTION 4.08. Limitation on Liens. [delete: The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on any of its assets or properties of any character, or any shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without making effective provision for all of the Notes and all other amounts due under the Indenture to be directly secured equally and ratably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the obligation or liability secured by such Lien. The foregoing limitation does not apply to the following: (i) Liens existing on the Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital Stock of the Company or its Restricted Subsidiaries created in favor of the Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the Company or such other Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (iii) of the second paragraph of Section 4.03 of this Indenture; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced; or (v) Permitted Liens. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on Orion 1, Orion 2 or Orion 3 that secures Indebtedness, other than pursuant to clause (xxi) of the definition of Permitted Liens.] SECTION 4.09. Limitation on Sale-Leaseback Transactions. [delete: The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any sale-leaseback transaction involving any of its assets or properties whether now owned or hereafter acquired, whereby the Company or a Restricted Subsidiary sells or transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which the Company or such Restricted Subsidiary, as the case may be. intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred. The foregoing restriction does not apply to any sale-leaseback transaction if (i) the lease is for a period, including renewal rights, of not in excess of three years; (ii) the lease secures or relates to industrial revenue or pollution control bonds; (iii) the transaction is solely between the Company and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within twelve months after the sale or transfer of any assets or properties is completed, applies an amount not less than the net proceeds received from such sale or transfer in accordance with clause (i)(A) or (i)(B) of the second paragraph of Section 4.10 of this Indenture.] 123 SECTION 4.10. Limitation on Asset Sales. [delete: The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary (including the amount of any Released Indebtedness) is at least equal to the fair market value of the assets sold or disposed of and (ii) at least 85% of the consideration received (excluding the amount of any Released Indebtedness) consists of cash or Temporary Cash investments. In the event and to the extent that the Net Cash Proceeds received by the Company or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of the Company and its subsidiaries has been filed pursuant to Section 4.18, then the Company shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the Company or any Restricted Subsidiary owing to a Person other than the Company or any of its Restricted Subsidiaries or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i) as provided in the following paragraph of this Section 4.11. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this Section 4.10 totals at least $10 million, the Company must commence, not later than the fifteenth Business Day of such month, and consummate an Offer to Purchase from the Holders on a pro rata basis an aggregate principal amount Notes equal to the Excess Proceeds on such date, at a purchase price equal to 101% of the principal amount of the Notes, plus accrued interest (if any) to the Payment Date.] SECTION 4.12. Repurchase of Notes upon a Change of Control. [delete: The Company shall commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the principal amount of the Notes, plus accrued interest (if any) to the Payment Date.] SECTION 4.13. Existence. [delete: Subject to Articles Four and Five of this Indenture, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence of each Restricted Subsidiary in accordance with the respective organizational documents of the Company and each such Restricted Subsidiary and the rights (whether pursuant to charter, partnership certificate, agreement, statute or otherwise), licenses and franchises of the Company and each such Restricted Subsidiary, provided that the Company shall not be required to preserve any such right, license or franchise, or the existence of any Restricted Subsidiary (other than of the Company), if, the maintenance or preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole; and provided further that any Restricted Subsidiary may consolidate with, merge into, or sell, convey, transfer, lease or otherwise dispose of all or part of its property and assets to the Company or any Wholly Owned Restricted Subsidiary.] 124 SECTION 4.14. Payment of Taxes and Other Claims. [delete: The Company will pay or discharge and shall cause each Restricted Subsidiary to pay or discharge, or cause to be paid or discharged, before the same shall become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon (a) the Company or any such Restricted Subsidiary, (b) the income or profits of any such Restricted Subsidiary which is a corporation or (c) the property of the Company or any such Restricted Subsidiary and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any such Restricted Subsidiary, provided that the Company shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings or by the Company and its Restricted Subsidiaries where the failure to effect such payment is not adverse in any material respect to the Holders.] SECTION 4.15. Maintenance of Properties and Insurance. [delete: The Company shall maintain (a) in-orbit insurance with respect to Orion 1 in an amount at least equal to the cost to replace such satellite with a satellite of comparable or superior technological capability (as estimated by the Board of Directors) and having at least as much transmission capacity as such satellite, and (b) with respect to Orion 2, Orion 3, each other satellite to be launched by the Company or any Restricted Subsidiary and each replacement satellite therefor, (i) launch insurance with respect to each such satellite covering the period from the launch of such satellite to 180 days following such launch in an amount equal to or greater than the sum of (A) the cost to replace such satellite pursuant to the contract pursuant to which a replacement satellite will be constructed, (B) the cost to launch a replacement satellite pursuant to the contract pursuant to which a replacement satellite will be launched and (C) the cost of launch insurance for such satellite or, in the event that the Company has reason to believe that the cost of obtaining comparable insurance for a replacement satellite would be materially higher, the Company's best estimate of the cost of such comparable insurance and (ii) at all times subsequent to 180 days after the launch (if it is a Successful Launch) of, each such satellite, in-orbit insurance in an amount at least equal to the cost to replace such satellite with a satellite of comparable or superior technological capability (as estimated by the Board of Directors) and having at least as much transmission capacity as such satellite was designed to have. The in-orbit insurance required by this Section 4.15 shall provide that, if 50% or more of a satellite's initial capacity is lost, the full amount of insurance will become due and payable, and that, if a satellite is able to maintain more than 50% but less than 90% of its initial capacity, a pro rata portion of such insurance will become due and payable. The insurance required by this Section 4.15 shall name the Company and/or any Guarantor as the sole loss payee or payees, as the case may be, thereof. In the event that the Company (or a Guarantor) receives proceeds from insurance relating to any satellite, the Company (or a Guarantor) may use a portion of such proceeds to repay any vendor or third-party purchase money financing pertaining to such satellite (other than Orion 1) that is required to be repaid by reason of the loss giving rise to such insurance proceeds. The Company (or a Guarantor) may use the remainder of such proceeds to develop, construct, launch and insure a replacement satellite (including components for a related ground spare) if (i) such replacement satellite is of comparable or superior technological capability as compared with the satellite being replaced and has at least as much transmission capacity as the satellite being replaced and (ii) the Company will have sufficient funds to service the Company's projected debt service requirements until the scheduled launch of such replacement satellite and for one year thereafter and to develop, construct, launch and insure (in the amounts required by the preceding paragraph) such replacement satellite, provided that such replacement satellite is scheduled to be launched within 15 months of the receipt of such proceeds. Any such proceeds not used as permitted by this Section 4.15 shall be applied, within 90 days, to reduce Indebtedness of the Company or shall constitute "Excess Proceeds" for purposes of Section 4.10. 125 The Company shall further provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds considered reasonable by the Company in the conduct of its business. The Company shall cause all properties owned by the Company or any Subsidiary or used or held for use in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.15 shall prevent the Company from discontinuing the maintenance of any of such properties if such discontinuance is not disadvantageous in any material respect to the Holders.] SECTION 4.18. SEC Reports and Reports to Holders. [delete: Whether or not the Company is required to file reports with the SEC, the Company shall file with the SEC all such reports and other information as it would be required to file with the SEC by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company shall, at the Company's expense, supply the Trustee and each Holder, or shall supply to the Trustees for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information.] SECTION 4.19. Waiver of Stay, Extension or Usury Laws. [delete: The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture, and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.] ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. CONSOLIDATION, MERGER AND SALE OF ASSETS. Each of the Company and each Guarantor will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into the Company or any Guarantor unless: (i) the Company or any Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or Guarantor) formed by such consolidation or into which the Company or any Guarantor, as the case may be, is merged or that acquired or leased such property and assets of the Company or any Guarantor, as the case may be, shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustees, all of the obligations of the Company or any Guarantor, as the case may be, on all of the Notes and under the Indenture; [delete: (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (iii) if such transaction involves the Company or any Significant Subsidiary thereof, immediately after giving effect to such transaction on a pro forma basis, the Company, or any Person becoming the 126 successor to the Company as obligor on the Notes shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; (iv) if such transaction involves the Company or any Significant Subsidiary thereof, immediately after giving effect to such transaction on a pro forma basis, the Company, or any Person becoming the successor obligor of the Notes, as the case may be, could Incur at least $1.00 of Indebtedness under the first paragraph of Section 4.03; provided that this clause (iv) shall not apply to a consolidation or merger with or into a Wholly Owned Restricted Subsidiary with a positive net worth; provided that, in connection with any such merger or consolidation, no consideration (other than Common Stock in the surviving Person or the Company) shall be issued or distributed to the stockholders of the Company; and] (v) the Company or Guarantor, as the case may be, delivers to the Trustee an Officers' Certificate [delete: (attaching the arithmetic computations to demonstrate compliance with clauses (iii) and (iv), if applicable)] and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with; [delete: provided, however, that clauses (iii) and (iv) above do not apply if, in the good faith determination of the Board of Directors of the Company, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of incorporation of the Company; and provided further that any such transaction shall not have as one of its purposes the evasion of the foregoing limitations. Notwithstanding the foregoing, the provisions of this Section 5.01 shall not apply to the Merger.] SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or any sale, conveyance, transfer or other disposition of all or substantially all of the property and assets of the Company or any Guarantor, as the case may be, in accordance with Section 5.01 of this Indenture, the successor Person formed by such consolidation or into which the Company or such Guarantor is merged or to which such sale, conveyance, transfer or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor under this Indenture with the same effect as if such successor Person had been named as the Company or such Guarantor herein and thereafter, except in the case of a lease, the predecessor Person shall [delete: not] be relieved of all obligations and covenants under this Indenture and the Notes. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. [delete: (c) the Company defaults in the performance of or breaches Section 5.01 of this Indenture or fails to make or consummate an Offer to Purchase in accordance with Section 4.10 or Section 4.12 of this Indenture; (e) there occurs with respect to (A) any issue or issues of Indebtedness of the Company, any Guarantor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created or (B) the TT&C Financing or any refinancing thereof which is secured by substantially the same collateral, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; 127 (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company, any Guarantor or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or, otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company, any Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, any Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; (h) the Company, any Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking, possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar, official of the Company, any Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; or (i) the occurrence of an "Event of Default" described in paragraph (i), (j), (k), (1), (m) or (n) of Section 18.1 of the Debenture Purchase Agreement.] The penultimate paragraph of Section 10.10 or 11.01, as applicable, of the existing notes indentures will be amended and restated in its entirety to read as follows: Each Guarantor hereby irrevocably defers, until the principal of, premium, if any, and interest on the Notes shall have been paid in full, any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of its obligations under its Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Company or any collateral which any such Holder or the Trustee on behalf of such Holder hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off of in any other manner, payment or security on account of such claim or other rights, except (a) each Transferred Guarantor shall not be subject to the foregoing limitations and (b) the Company and the Guarantors (other than Transferred Guarantors) shall, at the request of any Transferred Guarantor, indemnify such Transferred Guarantor for any amount (including guarantee payments) or expense incurred by such Transferred Guarantor under its Guarantee. If any amount shall be paid to any Guarantor (other than a Transferred Guarantor) in violation of the preceding sentence and the principal of, premium, if any, and accrued interests on the Notes shall not have been paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee for the benefit of the Holders to be credited and applied upon the principal of, premium, if any, and accrued interest on the Notes. Each Guarantor acknowledges that it will receive direct and indirect benefits from the issuance of the Notes pursuant to this Indenture and that the waivers set forth in this Section [10.01/11.01] are knowingly made in contemplation of such benefits. As used herein, the term "Transferred Guarantor" refers to any Guarantor engaged in the data business the stock of which (or the stock of any direct or indirect owner of such stock) is transferred to a Person other than the Company or another Guarantor. 128 FEDERAL INCOME TAX CONSEQUENCES This summary of the federal income tax consequences of the exchange offer is based on the opinion of Willkie Farr & Gallagher, our counsel, as to material federal income tax consequences expected to result from the exchange offer. An opinion of counsel is not binding on the Internal Revenue Service (the "IRS") or the courts and is based on current law and legal authority that may change retroactively. This is not comprehensive tax advice and does not consider all the facts that might affect your tax consequences. You should consult with your own tax advisor as to federal income tax consequences of the exchange offer as well as any tax consequences to you under foreign, state, or local law. By accepting the tender offer, you have agreed to treat the transaction as an exchange under Section 1001 of the Internal Revenue Code of 1986, as amended (the "Code"), of Loral CyberStar's existing notes for Loral CyberStar's new notes and Loral Space warrants. There is an exchange of notes for tax purposes if the new notes represent a significant modification of the existing notes. We believe that the new notes are properly classified as securities for purposes of Sections 354 and 356 of the Code, and therefore, the exchange will be treated as a recapitalization with boot within the meaning of Section 368(a)(1)(E) of the Code. GAIN OR LOSS REALIZED Determining the gain or loss recognized in the exchange offer is a two step process. The first is to determine the gain realized, which is the amount by which your "amount realized" in the exchange exceeds your tax basis in your existing notes. The second is to compute the portion of the gain or loss realized that is recognized for tax purposes. Gain or Loss Realized Gain or loss realized in the exchange generally will be determined by the difference between your "amount realized" and your tax basis in your existing notes. We believe that neither the existing notes nor the new notes will be considered to be publicly traded for purposes of Section 1273 of the Code. They would be so considered if they were traded on an established market at any time during the 60 day period ending 30 days after the date of the exchange. Being traded on an established market includes appearing in a quotation medium of general circulation that provides a reasonable basis for determining their fair market value. Whether or not this will occur cannot be determined at this time. Because we believe that neither the existing nor the new notes will become publicly traded during the relevant time period, we believe that your amount realized will be the sum of (a) the principal amount of the new notes you receive plus (b) the fair market value of the Loral Space warrants you receive. If the new notes are publicly traded, then your amount realized would be the sum of (a) the fair market value of your new notes determined by reference to the prices at which they publicly trade and (b) the fair market value of the Loral Space warrants you receive. The calculation would be slightly different if the existing new notes were publicly traded and the new notes were not. We believe that this situation is unlikely to occur. We do not expect that it will be possible to determine the fair market value of the Loral Space warrants on the basis of public trading. We expect that the value of each warrant will be between $0.60 and $0.90 and will inform you of the value we intend to use for federal income tax purposes. For purposes of these calculations, unpaid interest that accrued during the period you held your senior notes is treated as a separate item of property. Further, based on the advice of counsel, we believe that it is likely that the increase in the accreted value of senior discount notes while you held them is also treated as a separate item. If you are a cash basis taxpayer, you would recognize ordinary interest income with respect to your senior notes to the extent that any of your amount realized was allocable to unpaid interest that accrued during the period you held them. As set forth above under "Exchange Offer -- Interest on the New 129 Notes," you will be deemed to have waived your right to any payments with respect to interest accruing after October 15, 2001. We believe that this waiver is probably effective for tax purposes and, in such event, none of your amount realized would be allocable to post-October 15th interest and you will not realize or recognize ordinary income with respect to waived interest. The IRS, however, may take a contrary view. If you are an accrual basis holder of senior notes and if you were considered to accrue interest income after July 15, 2001, such accrual should be considered to exceed your allocable amount realized. Such excess would be a realized and recognized loss. It is possible that any such loss would be a short term capital loss rather than an ordinary loss. The difference between the issue price of the senior discount notes and their principal amount represents original issue discount that is recognized by both cash and accrual basis holders over the term of those notes. Although it is not free from doubt, we believe that the original issue discount that accrued and was taken into taxable income over the period you held your senior discount notes is treated in generally the same manner as an accrual basis taxpayer would treat accrued interest. One difference would be that if the loss is capital, it would be short-term or long-term depending upon when you recognized the original issue discount as income. While the legislative history of the applicable provision clearly indicated that you would have a realized and recognized loss from the original issue discount you have taken into income, the IRS issued a Technical Advice Memorandum in 1995 that reached a contrary position. Such memoranda are not binding precedent for either the IRS or for taxpayers and are not as fully reviewed as more binding pronouncements. Our counsel has advised us that they believe that the Technical Advice Memorandum should not overcome contrary legislative history. As set forth above under "Exchange Offer -- Interest on the New Notes," you will be deemed to have waived your right to any payments with respect to accretions in value of your senior discount notes after October 15, 2001. We believe that this waiver is probably effective for tax purposes and, in such event, none of your amount realized would be allocable to post-October 15th accretions. The IRS, however, may take a contrary view. Under these rules you could have a realized and recognized loss with respect to your accrued interest or original issue discount and a realized gain with respect to the balance of your interest in your existing notes. Similarly, a cash basis holder could have interest income with respect to accrued but unpaid interest and a realized loss on his senior notes. Loss Recognized The recognition of loss with respect to accrued interest and original issue discount is discussed above. Any loss realized on the balance of your interest in your existing notes will not be recognized for tax purposes. Any unrecognized loss will be bond premium which you may amortize over the term of your new notes as provided in Section 171 of the Code. Gain Recognized Except to the extent that you choose to take the position described in the following paragraph, the portion of your realized gain that will be recognized for tax purposes is the greater of: (a) the fair market value of the Loral Space warrants you receive or (b) the amount of market discount that has accrued under Section 1276 of the Code during the period you held your existing notes and that has not yet been recognized as income. The gain will be ordinary income to the extent of the previously unrecognized market discount. For those who hold their existing notes as capital assets, any remaining gain will be capital and long-term or short-term depending on your holding period for the existing notes. Congress inserted a provision to Section 1276 of the Code, intending that the Treasury would write regulations under which the market discount recognized as income in a recapitalization would be limited to the value of the Loral Space warrants with any balance of the accrued market discount carrying over to 130 the new notes. The amount of the market discount carried over would be limited by the excess of the issue price of your new notes over your tax basis in such notes. To date, the Treasury has not written these regulations and you may wish to consult with your own tax advisor as to whether it is possible to take the position that the provision in the statute is self executing in the absence of Treasury Regulations. BASIS AND HOLDING PERIOD Your basis in your existing notes generally will equal the amount you paid for them, plus any market discount you may have elected to accrue and plus, in the case of senior discount notes, the amount of original issue discount that accrued during the period you held them. Your basis in an amount equal to the accrued interest and accrued original issue discount is allocated to those items if they are taxed differently, as described above, from the remainder of your interest in your existing notes. The balance of your basis is allocated to your remaining interest those notes. Your basis in any exchange consideration allocable to any such specially taxed item will be its allocable share of your amount realized in the exchange offer. Your holding period for such exchange consideration will begin its receipt. If you do not recognize gain on the balance of your interest in existing notes, your holding period and allocable tax basis in your existing notes will carry over to the new notes and the Loral Space warrants that are deemed to be received in the exchange. Basis will be apportioned between the new notes and the warrants based on their relative fair market values. If you do recognize gain on the balance of your interest in the existing notes received in the exchange, your allocable basis in your new notes received in the exchange will be your basis in your existing notes increased by the amount of the gain recognized and reduced by the fair market value of the Loral Space warrants you receive. Your holding period in such existing notes will carry over to such new notes. You will have a fair market value basis in your warrants, and your holding period for them will start on the exchange date. IF THE NOTES ARE NOT SECURITIES Whether a debt instrument is a "security" depends on the terms, conditions and other facts and circumstances relating to the instrument. We believe the new notes will be securities based on their bullet maturity of over four and one half years, their rating, their interest rate and the yield at which they are expected to be bought and sold. If the new notes do not qualify as securities under Sections 354 and 356, the exchange will be a taxable event for U.S. federal income tax purposes. You will recognize gain or loss. You would hold your new notes and Loral Space warrants with a basis equal to the amount realized on the exchange and would commence a new holding period for them. CASH RECEIVED IN LIEU OF LESS THAN $1,000 IN NEW NOTES The tax treatment of this payment will be determined as if you had received new notes with a principal amount equal to your cash payment and such notes had been immediately redeemed. This deemed redemption will be a taxable transaction in which any gain or loss will be recognized. ORIGINAL ISSUE DISCOUNT If neither the existing nor the new notes are considered to be publicly traded, the issue price of the new notes will be their stated principal amount and, except as provided below on pre-issuance accrued interest, there will be no original issue discount. However, if either of the notes are publicly traded, the issue price will be determined by their trading value. It is then likely that their principal amount will exceed their issue price and the new notes will be issued with original issue discount equal to such excess. 131 The new notes will be issued with pre-issuance accrued interest from October 15, 2001. We intend to treat this accrued interest, which is payable on July 15, 2002, not as an interest payment but as an amount taken into account in determining original issue discount. As a consequence, you will recognize this pre-issuance accrued interest over the term of the new notes. The holder of a note issued with original issue discount is required to include original issue discount in income as ordinary interest as it accrues under a constant yield method in advance of receipt of cash payments attributable to that income. In general, the amount of original issue discount included in income by a holder is the sum of the daily portions of original issue discount for each day during the taxable year, or portion thereof, on which the holder held the new note. The daily portion is determined by allocating the original issue discount for an accrual period equally to each day in the accrual period. Your accrual period for the new notes may be of any length and may vary in length over the term of the new note. However, no accrual period may exceed one year, and each scheduled payment of principal or interest must occur on either the first or final day of the accrual period. The amount of original issue discount attributable to an accrual period is generally equal to the product of the new note's adjusted issue price at the beginning of that accrual period and its yield to maturity, i.e., the discount rate that, when applied to all payments under the new notes, results in a present value equal to the issue price. The adjusted issue price of a new note at the beginning of any accrual period is the issue price of the new note, plus the amount of original issue discount allocable to all prior accrual periods, minus the amount of any prior payments in respect of the new notes, including payments of stated interest. Under these rules, the holder must generally include in income an increasingly greater amount of original issue discount in each successive accrual period. We will annually send a Form 1099-OID, setting forth the accrual for the taxable year, for each non-corporate holder of record not otherwise exempt from such reporting requirements. MARKET DISCOUNT If your basis in your new notes is less than their issue price, the difference is market discount. You may elect to include market discount in income currently. Unless you make this election, you will recognize ordinary gain upon the sale or disposition of the notes, even if the transaction was one in which gain or loss would not ordinarily be recognized. Market discount will accrue under a ratable method unless you elect to use a constant interest method. The ratable method is more easily applied but it provides for marginally faster accrual of market discount. The greater the amount of market discount, the greater the difference in the two methods. Additionally, if the new notes are considered to be market discount notes, a portion of your deductions for interest incurred that is attributable holding your new notes will be deferred until you dispose of the notes. CONSTRUCTIVE DIVIDENDS ON ADJUSTMENTS TO WARRANT EXERCISE PRICE If at any time a distribution of cash or property is made to Loral Space shareholders that would be taxable to them as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution provisions of your Loral Space warrants, the conversion rate of the Loral Space warrants is increased, such increase may be deemed to be a distribution taxable as a dividend to the extent of Loral Space's accumulated earnings and profits. This result will follow even if we did not actually distribute any cash or other property to you. In the event that an adjustment to the warrants occurs and is treated as a taxable dividend, the amount of the taxable dividend will be the fair market value of the number of additional shares (or reduction in price of shares) that results from the warrant adjustment. 132 RETENTION OF THE EXISTING NOTES The modification of the existing notes in connection with the exchange offer will not be a taxable event to non-tendering holders of the existing notes. BACKUP WITHHOLDING Backup withholding and information reporting requirements may apply to certain payments of principal and interest, including original issue discount, on a note and to certain payments of proceeds of the sale or retirement of a note. We, our agent, a broker or any paying agent, as the case may be, will be required to withhold tax from any payment that is subject to backup withholding at a current rate of 30.5% (or 30% for payments made during the calendar year 2002) of such payment if the holder fails to furnish his taxpayer identification number, to certify that such holder is not subject to backup withholding or to otherwise comply with the applicable requirements of the backup withholding rules. Certain holders (including, among others, all corporations) are not subject to the backup withholding and reporting requirements. Under current Treasury Regulations, backup withholding and information reporting will not apply to payments made by us or any agent thereof to a holder of a note who has provided the required certification under penalties of perjury that it is not a U.S. holder or has otherwise established an exemption, provided that neither we nor our agent has actual knowledge that the holder is a U.S. holder or that the conditions of any other exemption are not satisfied. Any amount withheld from a payment to a holder under the backup withholding rules will be allowed as a refund or credit against the holder's federal income tax liability, so long as the required information is provided to the IRS. Generally, we are required to report to the holder of the note and to the IRS the amount of the tax withheld, if any, relating to these payments, and we will report such payments to the holder and IRS annually. Treasury Regulations that generally are effective for payments made after December 31, 2000, subject to certain transition rules, generally expand the circumstances under which the information reporting and backup withholding may apply. Holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules, including these Treasury Regulations. FOREIGN ISSUER CONSIDERATIONS The following discussion is based on the advice of Appleby, Spurling & Kempe, Bermuda counsel to Loral Space. Loral Space has been designated as a non-resident for exchange control purposes by the Bermuda Monetary Authority. Under Bermuda law, Loral Space is an exempted company (that is, it is exempted from the provisions of Bermuda law which stipulate that at least 60% of its equity must be beneficially owned by Bermudians). As an exempted company, Loral Space is exempt from Bermuda laws which restrict the percentage of share capital that may be held by non-Bermudians, but as an exempted company Loral Space may not participate in certain business transactions, including: (1) the acquisition or holding of land in Bermuda, except that required for its business and held by way of lease or tenancy for terms of not more than 21 years, without the express authorization of the Bermuda legislature; (2) the taking of mortgages on land in Bermuda to secure an amount in excess of $50,000 without the consent of the Bermuda Minister of Finance; (3) the acquisition of securities created or issued by, or any interest in, any local company or business, other than certain types of Bermuda government securities or securities of another 133 exempted company, partnership or other corporation resident in Bermuda but incorporated abroad; or (4) the carrying on of business of any kind in Bermuda, except in furtherance of Loral Space's business carried on outside Bermuda or under a license granted by the Bermuda Minister of Finance. The Bermuda government actively encourages foreign investment in exempted entities like Loral Space that are based in Bermuda but do not operate in competition with local business. In addition to having no restrictions on the degree of foreign ownership, Loral Space is subject neither to taxes on its income or dividends nor to any foreign exchange controls in Bermuda. In addition, there is no capital gains tax in Bermuda, and Loral Space can accumulate profits, as required, without limitation. BERMUDA TAX CONSIDERATIONS At the date of this prospectus, there is no Bermuda income tax, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate or stamp duty or inheritance tax payable by us or the holders, other than holders ordinarily resident in Bermuda, in respect of their investment in the Loral Space warrants. Loral Space has obtained from the Minister of Finance under the Exempted Undertakings Tax Protection Act 1966, as amended, a certificate confirming that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not until March 28, 2016 be applicable to Loral Space or to any of its operations, or other obligations of Loral Space except insofar as such tax applies to persons ordinarily resident in Bermuda and holding such new notes or other obligations, or to any land in Bermuda leased or rented to Loral Space. Loral Space is liable to pay the Bermuda government an annual registration fee calculated on a sliding scale based upon its assessable capital, which fee will not exceed BD$27,825. Loral Space has been classified as a non-resident of the Bermuda exchange control area by the Bermuda Monetary Authority, whose permission for the issue of the Loral Space warrants has been obtained. The transfer of Loral Space warrants between persons regarded as non-resident of Bermuda for exchange control purposes and the issue and exercise of the Loral Space warrants to and by such persons may be effective without specific consents under the Exchange Control Act 1972 of Bermuda and Regulations made thereunder. Transfers involving any person regarded as resident in Bermuda for exchange control purposes requires specific authorization under that Act. By virtue of being a non-resident of Bermuda for exchange control purposes, Loral Space is free to acquire, hold and sell any foreign currency, securities and other investments without restrictions. Purchasers of the Loral Space warrants may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase. Prospective purchasers should consult their tax advisers as to the tax laws of applicable jurisdictions and the specific tax consequences of acquiring, holding and disposing of the Loral Space warrants. LEGAL MATTERS Certain legal matters with respect to the issuance of the new notes and the warrants will be passed upon for us by Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York. In addition, Willkie Farr & Gallagher will deliver its opinion to us as to certain federal income tax consequences of the exchange offer and consent solicitation. Mr. Robert Hodes is of counsel to the law firm of Willkie Farr & Gallagher, a director of Loral Space and a member of the executive and audit committees of the board of directors of Loral Space. As of September 30, 2001, Mr. Hodes beneficially owned 69,484 shares of the common stock of Loral Space, including 49,284 shares exercisable under Loral Space's stock option plan. The validity of the warrants and the warrant shares will be passed upon for us by Appleby, Spurling, and 134 Kempe, Hamilton, Bermuda. In addition, Appleby, Spurling, and Kempe will provide certain legal conclusions regarding Bermuda tax law. EXPERTS The annual consolidated financial statements of Loral CyberStar, and the annual consolidated financial statements and related consolidated financial statement schedule of Loral Space incorporated in this prospectus by reference from the annual report on Form 10-K of Loral CyberStar for the year ended December 31, 2000 and the annual report on Form 10-K, as amended on Form 10-K/A, of Loral Space for the year ended December 31, 2000, respectively, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports, which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The annual consolidated financial statements of Globalstar, L.P. for the years ended December 31, 2000, 1999 and 1998 incorporated in this prospectus by reference from the annual report on Form 10-K/A of Loral Space for the year ended December 31, 2000, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of Loral Asia Pacific Satellite (HK) Limited as of December 31, 2000 and 1999, and for the year ended December 31, 2000 and the period from August 6, 1999 (inception) to December 31, 1999 included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934 and accordingly we file periodic reports, proxy statements and other information with the Securities and Exchange Commission. You may inspect and copy reports, proxy statements and other information at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. You may obtain information on the operation of the SEC's public reference facilities by calling the SEC at 1-800-SEC-0330. You also may obtain copies of periodic reports, proxy statements and other information at prescribed rates by writing to the SEC, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. You also may access this information electronically through the SEC's web site on the Internet at http://www.sec.gov. This web site contains reports, proxy statements and other information regarding registrants such as ourselves that have filed electronically with the SEC. This prospectus is a part of a registration statement filed by us with the SEC under the Securities Act of 1933. As permitted by the rules and regulations of the SEC, this prospectus does not contain all of the information contained in the registration statement and the exhibits and schedules thereto. As such we make reference in this prospectus to the registration statement and to the exhibits and schedules thereto. For further information about us and about the securities we hereby offer, you should consult the registration statement and the exhibits and schedules thereto. You should be aware that statements contained in this prospectus concerning the provisions of any documents filed as an exhibit to the registration statement or otherwise filed with the SEC are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. We will file with Bankers Trust Company, which acts as trustee under each of the indentures under which the new notes will be issued, within 15 days after we file with the SEC, copies of all of the annual reports and of the information, documents and other reports (or copies of such portions of any of the 135 foregoing as the SEC may prescribe) which we are required to file with the SEC pursuant to Section 13(a) and Section 15(d) of the Exchange Act. We will also provide such other information as is required pursuant to Section 314(a) of the Trust Indenture Act of 1939. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE We hereby incorporate by reference into this prospectus the following documents or information filed with the SEC (File No. 1-12744): (1) our Annual Report on Form 10-K for the fiscal year ended December 31, 2000; (2) our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001; (3) our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001; (4) our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001; (5) our Current Report on Form 8-K filed on October 26, 2001; (6) Loral Space's Annual Report on Form 10-K and, as amended on Form 10-K/A, for the fiscal year ended December 31, 2000; (7) Loral Space's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001; (8) Loral Space's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001; (9) Loral Space's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001; (10) Loral Space's Current Reports on Form 8-K filed on January 22, 2001, February 22, 2001, May 25, 2001 and October 26, 2001; (11) Description of Capital Stock contained in Loral Space's Form 10, dated April 12, 1996; and (12) all documents filed by us or Loral Space under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the registration statement of which this prospectus is part and prior to the effectiveness thereof or subsequent to the date of this prospectus and prior to the termination of the offering made hereby. For purposes of this prospectus, statements contained herein (or documents incorporated or deemed to be incorporated herein) will be considered modified or superseded to the extent that a subsequent statement contained herein (or a subsequently filed document incorporated or deemed to be incorporated herein) modifies them. Statements or documents that are so modified or superseded will not be considered part of this prospectus, except as so modified or superseded. This prospectus incorporates important business and financial information about us and Loral Space that is not included in or delivered with the document. This information is available to you without charge upon written or oral request to Loral SpaceCom Corporation, 600 Third Avenue, New York, New York 10016, Attention: Secretary, telephone (212) 697-1105. To obtain timely delivery, you must request the information no later than five business days before the date the exchange offer expires. YOU MUST REQUEST THIS INFORMATION BY DECEMBER 13, 2001. 136 INDEX TO FINANCIAL STATEMENTS LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC., A SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS LTD., A BERMUDA COMPANY)* Independent Auditors' Report................................ F-2 Balance Sheets as of September 30, 2001(unaudited), December 31, 2000 and December 31, 1999............................ F-3 Statements of Operations for the nine months ended September 30, 2001 (unaudited) and 2000 (unaudited), the year ended December 31, 2000, and the period from August 6, 1999 (inception) to December 31, 1999.......................... F-4 Statements of Shareholder's Equity for the nine months ended September 30, 2001 (unaudited), the year ended December 31, 2000 and the period from August 6, 1999 (inception) to December 31, 1999......................................... F-5 Statements of Cash Flows for the nine months ended September 30, 2001 (unaudited) and 2000 (unaudited), the year ended December 31, 2000 and the period from August 6, 1999 (inception) to December 31, 1999.......................... F-6 Notes to Financial Statements............................... F-7
F-1 INDEPENDENT AUDITORS' REPORT To the Shareholder of Loral Asia Pacific Satellite (HK) Limited We have audited the accompanying balance sheets of Loral Asia Pacific Satellite (HK) Limited (a wholly owned Hong Kong subsidiary of Loral CyberStar, Inc., a subsidiary of Loral Space & Communications Ltd., a Bermuda company) (the "Company") as of December 31, 2000 and 1999 and the related statements of operations, shareholder's equity and cash flows for the year ended December 31, 2000 and the period from August 6, 1999 (inception) to December 31, 1999, respectively. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the periods referred to above, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP San Jose, California November 13, 2001 F-2 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, SEPTEMBER 30, -------------------- 2001 2000 1999 ------------- -------- -------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.............................. $ -- $ -- $ 3,855 Accounts receivable, net of allowances of $63 in 2001, $309 in 2000 and $126 in 1999....................... 940 1,702 1,673 Due from Loral CyberStar............................... 65,769 33,388 -- Other current assets................................... 298 2,395 2,786 -------- -------- -------- Total current assets................................ 67,007 37,485 8,314 Satellite in-orbit, net.................................. 230,966 246,726 267,739 Other assets............................................. 933 503 98 Deferred taxes........................................... -- 2,098 2,562 -------- -------- -------- Total Assets............................................. $298,906 $286,812 $278,713 ======== ======== ======== LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Satellite purchase price payable....................... $ -- $ -- $180,755 Customer advances...................................... 217 226 1,133 Other current liabilities.............................. 1,398 3,114 1,229 Due to Loral CyberStar................................. -- -- 3,241 -------- -------- -------- Total current liabilities........................... 1,615 3,340 186,358 Deferred taxes........................................... 715 -- -- Customer deposits........................................ 2,337 2,395 2,285 Commitments and contingencies (Note 8)................... Shareholder's Equity: Common stock, $.10 par value; 100,000 shares authorized, issued and outstanding.................. 10 10 10 Capital contributions from Loral CyberStar............. 271,688 271,688 90,933 Retained earnings (deficit)............................ 22,541 9,379 (873) -------- -------- -------- Total shareholder's equity.......................... 294,239 281,077 90,070 -------- -------- -------- Total Liabilities and Shareholder's Equity............... $298,906 $286,812 $278,713 ======== ======== ========
See notes to financial statements. F-3 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) STATEMENTS OF OPERATIONS (IN THOUSANDS)
FOR THE FOR THE PERIOD NINE MONTHS ENDED FOR THE AUGUST 6, 1999 SEPTEMBER 30, YEAR ENDED (INCEPTION) TO ------------------ DECEMBER 31, DECEMBER 31, 2001 2000 2000 1999 ------- ------- ------------ -------------- (UNAUDITED) Revenues from satellite services............. $39,502 $31,971 $42,084 $5,611 ------- ------- ------- ------ Costs of satellite services.................. 19,233 19,489 25,989 6,686 Selling, general and administrative expenses................................... -- 626 390 268 ------- ------- ------- ------ Operating income (loss)...................... 20,269 11,856 15,705 (1,343) Interest income.............................. 8 89 80 -- Interest expense............................. 27 6 9 -- ------- ------- ------- ------ Income (loss) before income taxes............ 20,250 11,939 15,776 (1,343) Income tax (provision) benefit............... (7,088) (4,178) (5,524) 470 ------- ------- ------- ------ Net income (loss)............................ $13,162 $ 7,761 $10,252 $ (873) ======= ======= ======= ======
See notes to financial statements. F-4 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) STATEMENTS OF SHAREHOLDER'S EQUITY PERIOD FROM AUGUST 6, 1999 (INCEPTION) TO SEPTEMBER 30, 2001 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK ---------------- CAPITAL RETAINED TOTAL SHARES CONTRIBUTIONS EARNINGS SHAREHOLDER'S ISSUED AMOUNT FROM PARENT (DEFICIT) EQUITY ------ ------- ------------- --------- ------------- Capital Contributions from Loral 100 $ 10 $ 90,933 $ -- $ 90,943 CyberStar............................. Net Loss................................ -- -- -- (873) (873) --- ------- -------- -------- -------- Balance December 31, 1999............... 100 10 90,933 (873) 90,070 Capital Contribution from Loral -- -- 180,755 -- 180,755 CyberStar............................. Net Income.............................. -- -- -- 10,252 10,252 --- ------- -------- -------- -------- Balance December 31, 2000............... 100 10 271,688 9,379 281,077 Net Income.............................. -- -- -- 13,162 13,162 --- ------- -------- -------- -------- Balance September 30, 2001*............. 100 $ 10 $271,688 $ 22,541 $294,239 === ======= ======== ======== ========
- --------------- * Unaudited See notes to financial statements F-5 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE PERIOD NINE MONTHS ENDED AUGUST 6, 1999 SEPTEMBER 30, FOR THE YEAR ENDED (INCEPTION) -------------------- DECEMBER 31, TO DECEMBER 31, 2001 2000 2000 1999 ------- --------- ------------------ ------------------- (UNAUDITED) Operating activities: Net income (loss)................. $13,162 $ 7,761 $ 10,252 $ (873) Non-cash items: Deferred taxes................. 2,813 389 364 (2,570) Depreciation and amortization................. 15,760 15,759 21,013 5,428 Changes in operating assets and liabilities: Accounts receivable, net....... 762 (2,246) (29) (1,673) Due from Loral CyberStar....... (32,381) (22,160) (33,388) -- Other current assets........... 2,097 (1,237) 491 (2,778) Other assets................... (430) (407) (405) (98) Satellite purchase price payable...................... -- (180,755) (180,755) 180,755 Customer advances.............. (9) (1,045) (907) 1,133 Other current liabilities...... (1,716) 2,312 1,885 1,229 Due to Loral CyberStar......... -- (3,241) (3,241) 3,241 Customer deposits.............. (58) 260 110 2,285 ------- --------- --------- -------- Net cash (used in) provided by operating activities.............. -- (184,610) (184,610) 186,079 ------- --------- --------- -------- Investing activities: Purchase of satellite in orbit.... -- -- -- (273,167) Net cash used in investing activities........................ -- -- -- (273,167) ------- --------- --------- -------- Financing activities: Capital contributions from Loral CyberStar...................... -- 180,755 180,755 90,943 ------- --------- --------- -------- Net cash provided by financing activities........................ -- 180,755 180,755 90,943 ------- --------- --------- -------- (Decrease) increase in cash and cash equivalents....................... -- (3,855) (3,855) 3,855 Cash and cash equivalents -- beginning of period............................ -- 3,855 3,855 -- ------- --------- --------- -------- Cash and cash equivalents -- end of period............................ $ -- $ -- $ -- $ 3,855 ======= ========= ========= ========
See notes to financial statements F-6 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2000, PERIOD FROM AUGUST 6, 1999 (INCEPTION) TO DECEMBER 31, 1999 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (INFORMATION AS OF SEPTEMBER 30, 2001 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 IS UNAUDITED) 1. ORGANIZATION AND PRINCIPAL BUSINESS Loral Asia Pacific Satellite (HK) Limited, a Hong Kong company, (the "Company") is a wholly owned subsidiary of Loral CyberStar, Inc., a Delaware corporation, ("Loral CyberStar") which in turn is a wholly owned U.S. subsidiary of Loral Space & Communications Ltd., a Bermuda company, ("Loral Space"). The Company was formed August 6, 1999, ("Inception") in connection with the purchase of the Apstar IIR satellite as described below. On September 28, 1999, the Company purchased from APT Satellite Company Limited ("APT"), for approximately $273 million, the rights to all transponder capacity (except for one C-band transponder retained by APT) and existing customer leases on the Apstar IIR satellite, and renamed the satellite Telstar 10/Apstar IIR. The Company has full use of the transponders for the remaining life of Telstar 10/ Apstar IIR. Under the purchase agreement, the Company also has the option to lease from APT replacement satellites upon the end of life of Telstar 10/Apstar IIR. In March 2000, the Company made the final payment of approximately $181 million to APT, representing the unpaid satellite purchase price payable at December 31, 1999. The Company operates in one segment, the leasing of transponder capacity to customers for various applications, including broadcasting, Internet access and transmission, private voice and data networks, business television and direct-to-home television. 2. BASIS OF PRESENTATION The Company has a December 31 year-end. The accompanying financial statements include the accounts of the Company and have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The interim financial information as of September 30, 2001 and for the nine months ended September 30, 2001 and 2000 is unaudited and has been prepared on the same basis as the audited financial statements. In the opinion of the Company, such unaudited financial information includes all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations, financial position and cash flows as of and for such interim periods presented. The results of operations for the nine months ended September 30, 2001 are not necessarily indicative of the results to be expected for the full year. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses reported for the period. Actual results could differ from estimates. Significant estimates include the estimated useful life of the Company's satellite. F-7 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments. Cash collected directly by the Company is transferred to Loral CyberStar and applied to the due to/from Loral CyberStar balance. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. The Company believes that its credit evaluation, approval and monitoring processes combined with negotiated billing arrangements mitigate potential credit risks with regard to its current customer base. The Company's cash and cash equivalents are maintained with high-credit-quality financial institutions. Satellite In-Orbit The Company's sole fixed asset consists of the transponder rights on the Telstar 10/Apstar IIR satellite, which is stated at cost. Depreciation is provided on the straight-line method over its estimated useful life of 13 years from the date of purchase, which was based on engineering analyses performed at the in-service date of the satellite. The satellite life is reevaluated periodically. Losses from an in-orbit failure of the satellite, net of insurance proceeds, would be recorded in the period a loss occurs. The carrying value of the satellite is reviewed for impairment whenever events or changes in circumstances indicate that it may not be recoverable. The Company looks to current and future profitability, as well as current and future undiscounted cash flows, excluding financing costs, as primary indicators of recoverability. If an impairment would be determined to exist, any related impairment loss would be calculated based on fair value, as determined based on quoted market values, discounted cash flows or appraisals, as appropriate in the circumstance. Revenue Recognition The Company provides satellite capacity under lease agreements that provide for the use of satellite transponders for periods generally ranging from one year to the end of life of the satellite. Revenue under transponder lease agreements is recognized as services are performed, provided that a contract exists, the price is fixed or determinable and collectibility is reasonably assured. Revenues under contracts that include fixed lease payment increases are recognized on a straight line basis over the life of the lease. Customer contracts are cancelable in the event of loss of the Company's satellite (see Note 7). Functional Currency The Company's functional currency is the U.S. dollar. As substantially all transactions are denominated in U.S. dollars, no transaction gains or losses are reflected in the accompanying financial statements and no translation adjustments are required. Income Taxes The Company is subject to Hong Kong corporate income tax on the portion of its net income derived from Hong Kong sources. The Company is also subject to U.S. corporate income tax on its worldwide income and is included in the consolidated U.S. federal income tax return and certain combined state and F-8 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) local income tax returns of Loral Space & Communications Corporation (a subsidiary of Loral Space). Pursuant to a tax sharing agreement with Loral Space & Communications Corporation, the Company is entitled to reimbursement for the use of its tax losses, when such losses are utilized by the consolidated group; otherwise, the Company, in combination with Loral CyberStar, is required to pay their separate company income tax liability to Loral Space and Communications Corporation. For purposes of these financial statements, the provision for income taxes is computed as if the Company was a separate taxpayer; accordingly, the provision for income taxes is based upon reported income before income taxes and the corresponding tax obligation has been recorded through the due to/from Loral CyberStar balance. Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial and income tax reporting and are measured by applying tax rates in effect at the end of each year. New Accounting Pronouncements Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company adopted SFAS No. 133, as amended, on January 1, 2001. There was no effect on the Company's financial position or results of operations from the adoption of this standard. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." SAB No. 101, as amended, was effective for the Company in the fourth quarter of 2000 and clarified the SEC's views on U.S. GAAP relating to revenue recognition in financial statements. The requirements of SAB No. 101 did not have an impact on the Company's financial position or results of operations. In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140 replaces SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. The Company has adopted the applicable disclosure requirements of SFAS No. 140 in its financial statements. The Company has determined that there was no effect on the Company's financial position or results of operations relating to the adoption of the other provisions of SFAS No. 140. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset, except for certain obligations of lessees. The Company is required to adopt SFAS 143 on January 1, 2003. The Company has not yet determined the impact that the adoption of SFAS 143 will have on its results of operations or its financial position. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. It supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and amends the accounting and reporting provisions of F-9 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) APB 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. The Company is required to adopt SFAS 144 on January 1, 2002. The Company has not yet determined the impact that the adoption of SFAS 144 will have on its results of operations or its financial position. 4. COMPREHENSIVE INCOME (LOSS) During the periods presented, the Company's comprehensive income (loss) is the same as net income (loss). 5. SATELLITE IN-ORBIT Satellite in-orbit is comprised of (in thousands):
DECEMBER 31, SEPTEMBER 30, -------------------- 2001 2000 1999 ------------- -------- -------- (UNAUDITED) Transponder rights on satellite in-orbit......... $273,167 $273,167 $273,167 Accumulated depreciation......................... (42,201) (26,441) (5,428) -------- -------- -------- $230,966 $246,726 $267,739 ======== ======== ========
Depreciation expense was $15.8 million, $21.0 million and $5.4 million for the nine months ended September 30, 2001, the year ended December 31, 2000 and from Inception to December 31, 1999, respectively. As of December 31, 2000, approximately 60% of the transponder capacity on the satellite was leased under non-cancelable operating leases with terms averaging approximately 39 months and the remaining transponder capacity was available for future lease. The aggregate future minimum lease receipts due under non-cancelable operating leases for transponder capacity to the Company was approximately $280 million. 6. INCOME TAXES The (provision) benefit for income taxes consists of the following (in thousands):
NINE MONTHS PERIOD FROM ENDED YEAR ENDED INCEPTION TO SEPTEMBER 30, DECEMBER 31, DECEMBER 31, ----------------------- ------------ ------------ 2001 2000 2000 1999 ------------- ------- ------------ ------------ (UNAUDITED) U.S. federal: Current.............................. $(4,275) $(3,789) $(5,160) $(2,100) Deferred............................. (2,813) (389) (364) 2,570 ------- ------- ------- Total (provision) benefit for income taxes.............................. $(7,088) $(4,178) $(5,524) $ 470 ======= ======= ======= ======= Effective tax rate (federal tax rate)........................... (35)% (35)% (35)% (35)%
The Company is subject to Hong Kong corporate income tax on the portion of its net income derived from Hong Kong sources, which for all periods presented was zero. F-10 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. INCOME TAXES -- (CONTINUED) The Company is also subject to U.S. federal income taxation at regular corporate rates on its worldwide income and is included in the consolidated U.S. federal income tax return of Loral Space & Communications Corporation. Under the tax sharing agreement with Loral CyberStar, the provision for income taxes is computed as if the Company was a separate taxpayer, based upon the reported income before income taxes. The corresponding tax obligation has been recorded for each year through the due to/from Loral CyberStar balance. Further, pursuant to the tax sharing agreement for 1999, 2000 and 2001, the Company is entitled to reimbursement for the use of its tax losses, if such losses are utilized by the consolidated group. However, since the Company generated taxable income in 1999, 2000 and 2001, no reimbursement was received by the Company during any of these periods. The Company recognizes deferred tax assets and liabilities for the expected future consequences of temporary differences between the carrying amount of assets and liabilities for financial and income tax reporting which are measured by applying enacted tax rates at the end of the period. The significant components of the net deferred income tax asset (liability) are as follows (in thousands):
DECEMBER 31, SEPTEMBER 30, ---------------- 2001 2000 1999 ------------- ------ ------ (UNAUDITED) Depreciation......................................... $(771) $2,042 $2,562 Other................................................ 164 164 8 ----- ------ ------ Net deferred income tax asset (liability)............ $(607) $2,206 $2,570 ===== ====== ======
The net deferred income tax asset (liability) is classified as follows (in thousands):
DECEMBER 31, SEPTEMBER 30, ---------------- 2001 2000 1999 ------------- ------ ------ (UNAUDITED) Other current assets................................. $ 108 $ 108 $ 8 ===== ====== ====== Long-term deferred tax asset......................... -- $2,098 $2,562 ====== ====== Long-term deferred tax liability..................... $(715) -- -- =====
7. RELATED PARTY TRANSACTIONS Concurrent with the acquisition of the Telstar 10/Apstar IIR satellite, the Company entered into a lease agreement with Loral CyberStar. Pursuant to the terms of this lease agreement, the Company agreed to lease transponder capacity to Loral CyberStar on an as-needed basis at a rate equal to 90% of the retail price charged by Loral CyberStar to its end customers. The 10% retained by Loral CyberStar represents a management fee as compensation for estimated costs in support of the Company's operations. Revenues recorded by the Company pursuant to such lease agreement, excluding the 10% retention by Loral CyberStar, totaled $28.6 million, $25.3 million and $0.3 million for the nine months ended September 30, 2001, the year ended December 31, 2000 and from Inception to December 31, 1999, respectively. Loral CyberStar leases transponder capacity to Space Systems/Loral ("SS/L"), a wholly owned subsidiary of Loral Space. Revenues recognized by the Company on sales to SS/L totaled $5 million and $4 million for the nine months ended September 30, 2001 and the year ended December 31, 2000, respectively. F-11 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED (A WHOLLY OWNED HONG KONG SUBSIDIARY OF LORAL CYBERSTAR, INC.) NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 7. RELATED PARTY TRANSACTIONS -- (CONTINUED) In addition to the above transactions, the Company is required to reimburse Loral CyberStar for certain direct costs incurred on its behalf. For each of the respective dates, the balance due to/from Loral CyberStar in the accompanying balance sheets includes the unpaid balance due under the above lease agreement net of taxes payable and the reimbursement for certain direct costs and other amounts advanced to Loral CyberStar. 8. COMMITMENTS AND CONTINGENCIES The Company's Telstar 10/Apstar IIR satellite has experienced minor losses of power from its solar arrays. Although to date Telstar 10/Apstar IIR has not experienced any degradation in performance, there can be no assurance that it will not experience additional power loss that could result in performance degradation, including loss of transponder capacity. In the event of additional power loss, the extent of the performance degradation, if any, will depend on numerous factors, including the amount of the additional power loss, when in the life of Telstar 10/Apstar IIR the loss occurred and the number and type of use being made of transponders then in service. In connection with the renewal of the insurance for the Company's Telstar 10/Apstar IIR satellite in October 2001, the insurance underwriters have excluded losses due to solar array failures, since Telstar 10/Apstar IIR was manufactured by SS/L and has the same solar array configuration as another 1300 class satellite manufactured by SS/L that recently experienced a solar array failure of a different nature. SS/L believes that this failure is an isolated event and does not reflect a systemic problem in either the satellite design or manufacturing process. Accordingly, the Company does not believe that this anomaly will affect Telstar 10/Apstar IIR. SS/L is currently providing the basis for this conclusion to the insurance underwriters. While the Company anticipates that this exclusion will be removed upon further review by the insurance underwriters, there can be no assurance that this exclusion will be removed. In connection with the acquisition of Telstar 10/Apstar IIR the Company entered into a satellite services agreement with APT, pursuant to which APT provides telemetry, tracking and control and associated services for the Company's satellite in exchange for $1,000,000 per annum. In October 2001, Loral CyberStar announced that it will conduct a debt-for-debt exchange offer for its 11 1/4% Senior Notes due 2007 and its 12 1/2% Senior Discount Notes due 2007 (collectively, the Senior Notes), that would substantially reduce the principal amount of Loral CyberStar's outstanding debt obligations. CyberStar has an aggregate of $927 million principal amount Senior Notes outstanding as of September 30, 2001. The Company has provided a guarantee of the Senior Notes. The exchange offer is conditioned upon receiving tenders of at least 85% of the principal amount of the Senior Notes. If the exchange offer is accepted in full, the Company will issue new notes with an aggregate principal amount of $675 million which will also be fully and unconditionally guaranteed by the Company. F-12 Copies of the consent and letter of transmittal will be accepted. The consent and letter of transmittal, Existing Notes and any required documents should be sent by each holder or his broker, dealer, commercial bank, trust company or nominee to the Exchange Agent at the address set forth below. The Exchange Agent for the Exchange Offer and Consent Solicitation is: BANKERS TRUST COMPANY By Mail: By Facsimile: By Overnight Carrier: (615) 835-3701 BT Services Tennessee, Inc. BT Services Tennessee, Inc. Reorganization Unit Confirm by Telephone: Reorganization Unit P.O. Box 292737 (800) 735-7777 648 Grassmere Park Rd. Nashville, TN 37229-2737 Nashville, TN 37211
DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. Any questions or requests for assistance or additional copies of this prospectus or the consent and letter of transmittal may be directed to the Information Agent or the Dealer Managers and Solicitation Agents at their respective telephone numbers and addresses listed below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer and the Consent Solicitation. The Information Agent for the Exchange Offer and Consent Solicitation is: MORROW & CO., INC. Banks and Brokers Call Toll Free: U.S. Noteholders Call Toll Free: International Noteholders Call Collect: (800) 654-2468 (800) 607-0088 (212) 754-8000
The Lead Dealer Manager for the Exchange Offer and the Lead Solicitation Agent for the Consent Solicitation is: DRESDNER KLEINWORT WASSERSTEIN, INC. 1301 Avenue of the Americas New York, NY 10019 Attention: Steve Lam (212) 969-2615 The Co-Dealer Managers for the Exchange Offer and the Co-Solicitation Agents for the Consent Solicitation are: BANC OF AMERICA SECURITIES LLC J.P. MORGAN SECURITIES INC. LEHMAN BROTHERS INC. 100 North Tryon Street, 7th Floor 270 Park Avenue 101 Hudson Street, 31st Floor Charlotte, NC 28255 New York, NY 10017 Jersey City, NJ 07302 Attn: Henk Bouhuys Attn: Laura Yachimski Attn: Emily E. Shanks (888) 292-0070 (toll free) (212) 270-1100 (collect) (212) 681-2265 (collect) 704-388-2842 (collect) (800) 245-8812 (toll free) (212) 455-3327
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. LORAL CYBERSTAR, INC. Our Certificate of Incorporation provides that its directors will not be liable for monetary damages for breach of the directors' fiduciary duty of care to the Company and its stockholders. This provision in the Certificate of Incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Delaware law. In accordance with the requirements of Delaware law, as amended, the Certificate of Incorporation provides that the Company's directors would remain subject to liability for monetary damages (i) for any breach of their duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) under Section 174 of the Delaware Code for approval of an unlawful dividend or an unlawful stock purchase or redemption and (iv) for any transaction from which the director derived an improper personal benefit. This provision also does not affect a director's responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws. Our Certificate of Incorporation also provides that, except as expressly prohibited by law, we shall indemnify any person who was or is a party (or threatened to be made a party) to any threatened, pending or completed action, suit or proceeding by reason of the fact that such person is or was a director or officer of the Company (or is or was serving at the request of the Company as a director or officer of another enterprise), against expenses, liabilities and losses (including attorney's fees), judgments, fines and amounts paid or to be paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Such indemnification shall not be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless (and only to the extent that) the Delaware Court of Chancery or the court in which such action or suit was brought determines that, in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity. The Company has agreed to indemnify each of the Selling Stockholders and their respective officers, directors and trustees and each person who controls (within the meaning of the Securities Act) such Selling Stockholder against certain losses, claims, damages, liabilities, costs and expenses arising under the securities laws in connection with this offering. Each of the Selling Stockholders has agreed to indemnify the Company, its officers and directors and each person who controls (within the meaning of the Securities Act) the Company against any losses, claims, damages, liabilities, costs, and expenses arising under the securities laws in connection with this offering with respect to written information furnished to the Company by such Selling Stockholder. LORAL SPACE & COMMUNICATIONS LTD. Bermuda law permits a company to indemnify its directors and officers, except for any act of fraud or dishonesty. Loral Space has provided in its Bye-Laws that its directors and officers will be indemnified and held harmless against any expenses, judgments, fines, settlements and other amounts incurred by reason of any act or omission in the discharge of their duty, other than in the case of fraud or dishonesty. Bermuda law and the Bye-Laws of Loral Space also permit Loral Space to purchase insurance for the benefit of its directors and officers against any liability incurred by them for the failure to exercise the requisite care, diligence and skill in the exercise of their powers and the discharge of their duties, or indemnifying them in respect of any loss arising or liability incurred by them by reason of negligence, default, breach of duty or breach of trust. II-1 Loral Space intends to enter into indemnification agreements with its officers and directors. To the extent permitted by law, the indemnification agreements may require Loral Space, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors (other than liabilities arising from willful misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceedings against them as to which they could be indemnified. Loral Space maintains a directors' and officers' liability insurance policy. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. The following exhibits are filed herewith or to be filed by amendment: THE COMPANY
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 2.1 Agreement and Plan of Merger, dated as of October 7, 1997, by and among Orion, Loral Space and Loral Satellite Corporation(1) 2.2 Principal Stockholder Agreement among Orion, Loral Space, Loral Satellite Corporation and the stockholders that are signatories thereto, dated as of October 7, 1997(2) 2.3 Amendment No. 1 to Agreement and Plan of Merger, dated as of February 11, 1998, by and among Orion, Loral Space and Loral Satellite Corporation(3) 2.4 Amendment No. 1 to Principal Stockholder Agreement among Orion, Loral Space, Loral Satellite Corporation and the stockholders that are signatories thereto, dated as of December 1, 1997(4) 2.5 Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996, among Loral Corporation, Loral Aerospace Holdings, Inc., Loral Aerospace Corp., Loral General Partner, Inc., Loral Globalstar L.P., Loral Globalstar Limited, Loral Space and Lockheed Martin Corporation(5) 2.6 Amendment to Loral Space Restructuring, Financing and Distribution Agreement, dated as of April 15, 1996(5) 2.7 Agreement for the Purchase and Sale of Assets dated as of September 25, 1996 by and between AT&T Corp., as Seller, and Loral Space, as Buyer(6) 2.8 First Amendment to Agreement for the Purchase and Sale of Assets dated as of March 14, 1997 by and between AT&T Corp., as Seller, and Loral Space, as Buyer(7) 2.9 Agreement and Plan of Merger dated as of October 7, 1997 by and among Orion Network Systems, Inc., Loral Space and Loral Satellite Corporation(8) 2.10 First Amendment to Agreement and Plan of Merger dated as of February 11, 1998 by and among Orion Network Systems, Inc., Loral Space and Loral Satellite Corporation(9) 2.11 Second Amendment to Agreement and Plan of Merger dated as of March 20, 1998 by and among Orion Network Systems, Inc., Loral Space and Loral Satellite Corporation(10) 3.1 Certificate of Merger of Loral Satellite Corporation into Orion dated March 20, 1998 and Exhibit A thereto, Restated Certificate of Incorporation of Loral CyberStar(11) 3.2 Certificate of Merger of Loral CyberStar, Inc. into Loral Orion Services, Inc.(12) 3.3 Merger Agreement between Loral CyberStar, Inc. and Loral Orion Services, Inc.(12) 3.4 Certificate of Loral CyberStar and amendments thereto(12) 3.5 Amended and Restated By-Laws of Loral CyberStar(12) 3.6 Memorandum of Association of Loral Space(5) 3.7 Memorandum of Increase in Share Capital of Loral Space(5) 3.8 Amended and Restated Bye-Laws of Loral Space(12) 3.9 Third Amended and Restated Bye-Laws of Loral Space(13) 3.10 Schedule IV to the Third Amended and Restated Bye-Laws of Loral Space(13)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 4.1 Form of Orion Collateral Pledge and Security Agreement(14) 4.2 Form of Orion Senior Note Indenture, dated January 31, 1997, and Form of Note included therein(14) 4.3 Form of Orion Senior Discount Note Indenture, dated January 31, 1997 and Form of Note included therein(14) 4.4+ Form of Supplemental Indenture to Senior Note Indenture, dated January 31, 1997 4.5+ Form of Supplemental Indenture to Senior Discount Note Indenture, dated January 31, 1997 4.6 Indenture, dated January 15, 1999, by and between Loral Space and The Bank of New York, as trustee(15) 4.7+ Form of Indenture by and among Loral CyberStar, Loral Space and Loral Asia Pacific Satellite (HK) Limited and Bankers Trust Company, as trustee, and form of 10% Senior Notes due 2006, included therein 4.8+ Form of Guaranty Agreement between Loral Space and Bankers Trust Company, as trustee 4.9+ Form of Warrant Agreement to purchase shares of common stock of Loral Space between Loral Space and The Bank of New York, as warrant agent 4.10 Rights Agreement dated March 27, 1996 between Loral Space and The Bank of New York, Rights Agent(5) 5.1+ Opinion of Willkie Farr & Gallagher regarding the legality of the securities being registered by Loral CyberStar 5.2+ Opinion of Appleby, Spurling & Kempe regarding the legality of the securities being registered by Loral Space 8.1+ Opinion of Willkie Farr & Gallagher regarding certain federal income tax considerations 8.2+ Opinion of Appleby, Spurling & Kempe regarding certain Bermuda tax considerations for Loral Space 10.1 Second Amended and Restated Purchase Agreement, dated September 26, 1991 ("Satellite Contract") by and between OrionSat and British Aerospace PLC and the First Amendment, dated as of September 15, 1992, Second Amendment, dated as of November 9, 1992, Third Amendment, dated as of March 12, 1993, Fourth Amendment, dated as of April 15, 1993, Fifth Amendment, dated as of September 22, 1993, Sixth Amendment, dated as of April 6, 1994, Seventh Amendment, dated as of August 9, 1994, Eighth Amendment, dated as of December 8, 1994, and Amendment No. 9 dated October 24, 1995, thereto. [CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THESE DOCUMENTS.](16) 10.2 Restated Amendment No. 10, dated December 10, 1996, between Orion Atlantic and Matra Marconi Space, to the Second Amended and Restated Purchase Agreement, dated September 26, 1991 by and between OrionSat and British Aerospace PLC(17) 10.3 Contract for a Satellite Control System, dated December 7, 1992 by and between Loral Orion Services, Inc., Telespazio S.p.A. and Martin Marietta Corporation. [CONFIDENTIAL TREAT- MENT HAS BEEN GRANTED FOR PORTIONS OF THIS DOCUMENT.](16) 10.4 Credit Agreement, dated as of November 23, 1993, by and between Orion Atlantic, OrionSat and General Electric Capital Corporation ("GECC"). [CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THIS DOCUMENT.](16) 10.5 Security Agreement, dated as of November 23, 1993, by and between Orion Atlantic, OrionSat and GECC(16) 10.6 Assignment and Security Agreement, dated as of November 23, 1993, by and between Orion Atlantic, OrionSat and GECC(16)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.7 Consent and Agreement, dated as of November 23, 1993, by and between Orion Atlantic, Martin Marietta Corporation and GECC(16) 10.8 Deed of Trust, dated as of November 23, 1993, by and between Orion Atlantic, W. Allen Ames, Jr. and Michael J. Schwel, as Trustees, and GECC(16) 10.9 Lease Agreement, dated as of November 23, 1993, by and between OrionNet, Inc. and Orion Atlantic, as amended by an Amendment, dated January 3, 1995 [CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THESE DOCUMENTS.](16) 10.10 Note for Interim Loans, dated as of November 23, 1993, by and between Orion Atlantic and GECC(16) 10.11 Lease Agreement, dated as of October 2, 1992, by and between OrionNet and Research Grove Associates, as amended by Amendment No. 1, dated March 26, 1993, Amendment No. 2, dated August 23, 1993, and Amendment No. 3, dated December 20, 1993(16) 10.12 Restated Definitive Agreement, dated October 29, 1998, by and between Orion and Republic of the Marshall Islands [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT.](11) 10.13 Orion-Z Spacecraft Purchase Contract, dated May 15, 1998, by and between Loral Orion Services, Inc. and Loral Skynet(11) 10.14 Lockup Agreement, dated October 15, 2001, between Loral CyberStar and certain bondholders defined therein(8) 10.15 Agreement, dated January 1, 1999, by and between Loral Orion Services, Inc. and Loral Skynet(11) 10.16 Lease Agreement, dated as of August 18, 1999 by and between Loral Asia Pacific Satellite (HK) Limited and APT Satellite Company Limited(18) 10.17 Shareholders Agreement dated as of April 23, 1996 between Loral Corporation and Loral Space(5) 10.18 Amended Shareholders Agreement dated as of March 29, 2000 between Loral Space and Lockheed Martin Corporation(13) 10.19 Tax Sharing Agreement dated as of April 22, 1996 between Loral Corporation, Loral Space, Lockheed Martin Corporation and LAC Acquisition Corporation(5) 10.20 Exchange Agreement dated as of April 22, 1996 between Loral Space and Lockheed Martin Corporation(5) 10.21 Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., dated as of January 26, 1999 among Loral/Qualcomm Satellite Services, L.P., Globalstar Telecommunications Limited, AirTouch Satellite Services, Inc., Dacom Corporation, Dacom International, Inc., Hyundai Corporation, Hyundai Electronics Industries Co., Loral/DASA Globalstar, L.P., Loral Space, San Giorgio S.p.A., TeleSat Limited, TE.S.AM and Vodafone Satellite Services Limited(15) 10.22.1 Amendment dated as of December 8, 1999 to the Amended and Restated Agreement of Limited Partnership of Globalstar, L.P.(18) 10.22.2 Amendment dated as of February 1, 2000 to the Amended and Restated Agreement of Limited Partnership of Globalstar, L.P.(13) 10.23 Service Provider Agreements by and between Globalstar, L.P. and each of Loral General Partner, Inc. and Loral/DASA Globalstar, L.P.(19) 10.24 Contract between Globalstar, L.P. and Space Systems/Loral, Inc.(19) 10.25 Loral Space 1996 Stock Option Plan(5) 10.26.1 Amendment to Loral Space 1996 Stock Option Plan(15) 10.26.2 Loral Space 2000 Stock Option Plan(20) 10.26.3 Amendment No. 1 to Loral Space 2000 Stock Option Plan(21)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.26.4 Amendment No. 2 to Loral Space 2000 Stock Option Plan(21) 10.26.5+ Amendment No. 3 to Loral Space 2000 Stock Option Plan 10.27 Loral Space Common Stock Purchase Plan for Non-Employee Directors(5) 10.28 Employment Agreement between Loral Space and Bernard L. Schwartz(5) 10.29.1 Amendment dated as of March 1, 1998 to Employment Agreement between Loral Space and Bernard L. Schwartz(10) 10.29.2 Amendment dated as of July 18, 2000 to Employment Agreement between Loral Space and Bernard L. Schwartz(21) 10.30 Registration Rights Agreement dated as of August 9, 1996 among Loral Space, Lehman Brothers Capital Partners II, L.P., Lehman Brothers Merchant Banking Portfolio Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P. and Lehman Brothers Offshore Investment Partnership-Japan L.P.(22) 10.31 Registration Rights Agreement dated November 6, 1996 relating to Loral Space's 6% Convertible Preferred Equivalent Obligations due 2006(23) 10.32 Registration Rights Agreement (Series C Preferred Stock) dated as of March 31, 1997 between Loral Space and Finmeccanica S.p.A. and dated as June 23, 1997 among Loral Space, Aerospatiale SNI and Alcatel Espace(24) 10.33 Registration Rights Agreement (Common Stock) dated as of June 23, 1997 among Loral Space, Aerospatiale SNI and Alcatel Espace(24) 10.34 Alliance Agreement dated as of June 23, 1997 among Loral Space, Aerospatiale SNI, Alcatel Espace and Finmeccanica S.p.A.(24) 10.35 Principal Stockholder Agreement dated as of October 7, 1997 among Loral Space, Loral Satellite Corporation, Orion Network Systems, Inc. and certain Orion stockholders signatory thereto(25) 10.36.0 Amended and Restated Credit and Participation Agreement, dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/Loral, Inc. and the banks parties thereto, Bank of America National Trust and Savings Association, as Administrative Agent, and Istituto Bancario San Paolo di Torino S.p.A., individually and as Italian Export Financing and Arranger and as Selling Bank(26) 10.37.1 First Amendment dated as of May 7, 1998 to and of the Amended and Restated Credit and Participation Agreement, dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/Loral, Inc. and the banks parties thereto(15) 10.37.2 Second Amendment dated as of September 4, 1998 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Sys- tems/Loral, Inc. and the banks parties thereto(13) 10.37.3 Third Amendment dated as of July 12, 1999 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/Loral, Inc. and the banks parties thereto(13) 10.37.4 Fourth Amendment dated as of November 10, 1999 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/ Loral, Inc. and the banks parties thereto(13) 10.37.5 Fifth Amendment dated as of December 15, 2000 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/ Loral, Inc. and the banks parties thereto(21) 10.38 Agreement of Limited Partnership of CyberStar, L.P. dated as of June 30, 1997(10)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.39 Purchase and Sale Agreement dated November 17, 1997 between the Federal Government of the United Mexican States and Corporativo Satelites Mexicanos, S.A. de C.V. for the purchase and sale of the capital stock of Satelites Mexicanos, S.A. de C.V. (English translation of Spanish original)(10) 10.40 Amended and Restated Membership Agreement dated and effective as of August 21, 1998 among Loral Satmex Space and Ediciones Enigma, S.A. de C.V. and Firmamento Mexicano, S. de R.L. de C.V.(15) 10.41 Letter Agreement dated December 29, 1997 between Loral Space, Telefonica Autry S.A. de C.V., Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc. and Lehman Commercial Paper Inc. and related Agreement between the Federal Government of United Mexican States, Telefonica Autrey, S.A. de C.V., Ediciones Enigma, S.A. de C.V., Loral Space, Loral Satmex Space and Servicios Corporativos Satelitales, S.A. de C.V.(10) 10.42 Shareholders Agreement dated December 7, 1998 by and among Alcatel SpaceCom, Loral Space, Dr. Jurgen Schulte-Hillen and EuropeStar Limited(15) 10.43 Registration Rights Agreement dated as of January 21, 1999 relating to Loral Spaces 9 1/2% Senior Notes due 2006(15) 10.44 Lease Agreement dated as of August 18, 1999 by and between Loral Asia Pacific Satellite (HK) Limited and APT Satellite Company Limited(25) 10.45 Registration Rights Agreement dated as of February 18, 2000 relating to Loral Space's 6% Series D Convertible Redeemable Preferred Stock due 2007(13) 10.46 Fee Agreement dated as of April 19, 1996 by and among Globalstar, Globalstar Telecommunications Limited, Loral Corporation, Loral Space, Qualcomm Limited Partner, Inc., Space Systems/ Loral, Inc. and DASA Globalstar Limited Partner, Inc.(28) 10.47 Intercreditor Agreement dated as of April 19, 1996 by and among Globalstar, Globalstar Telecommunications Limited, Loral Corporation, Loral Space, Qualcomm Limited Partner, Inc., Space Systems/Loral, Inc. and DASA Globalstar Limited Partner, Inc.(28) 10.48 Credit Agreement dated as of November 17, 2000 by and among Loral Satellite, Inc., Bank of America, National Association, Bank of America Securities LLC, Credit Lyonnais and Lehman Commercial Paper, Inc.(29) 10.49 Guaranty dated as of November 17, 2000 made by Loral Space(29) 10.50 Assignment, Amendment and Release Agreement dated as of November 17, 2000 by and among the lenders parties to the Globalstar Credit Agreement, Loral Satellite, Inc., Loral Satcom Space, Loral Space, Loral Space & Communications Corporation, Globalstar, L.P. and Bank of America, National Association(29) 10.51 Amended and Restated Collateral Agreement dated as of November 17, 2000 by and among Loral Satellite, Inc. and Bank of America, National Association(29) 10.52 Form of Employment Protection Agreement(21) 12.0* Statement re: Loral CyberStar computation of ratio of earnings to fixed charges. 12.1* Statement re: Loral Space computation of ratio of earnings to fixed charges. 21.1 List of subsidiaries of the Loral CyberStar(21) 21.2 List of subsidiaries of the Loral Space(21) 23.1+ Consent of Willkie Farr & Gallagher (included in Exhibits 5.1 and 8.1) 23.2+ Consent of Appleby, Spurling & Kempe (included in Exhibits 5.2 and 8.2)
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 23.3+ Consent of Deloitte & Touche LLP 23.4+ Consent of Deloitte & Touche LLP 23.5+ Consent of Deloitte & Touche LLP 24.1* Powers of Attorney (included on the signature pages of the Registration Statement). 25.1* Statement on Form T-1 of Eligibility of Trustee. 99.1+ Form of Consent and Letter of Transmittal 99.2+ Form of Notice of Guaranteed Delivery 99.3+ Form of Letter to Clients 99.4+ Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and other Nominees
- --------------- + Filed herewith * Previously filed (1) Incorporated by reference to exhibit number 2.1 in Loral CyberStar's Current Report on Form 8-K dated October 9, 1997. (2) Incorporated by reference to exhibit number 2.2 in Loral CyberStar's Current Report on Form 8-K dated October 9, 1997. (3) Incorporated by reference to exhibit number 2.2 in Loral CyberStar's Registration Statement No. 333-46407 on Form S-4. (4) Incorporated by reference from Annual Report on Loral CyberStar's Form 10-K for fiscal year ended December 31, 1997. (5) Incorporated by reference from Loral Space's Registration Statement on Form 10 (No. 1-14180). (6) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on September 27, 1996. (7) Incorporated by reference from Loral Space's Current Report on Form 8-K on March 28, 1997. (8) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on October 26, 2001. (9) Incorporated by reference from Loral Space's Registration Statement on Form S-4 filed on February 17, 1998 (File No. 333-46407). (10) Incorporated by reference from Loral Space's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. (11) Incorporated by reference from Loral CyberStar's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. (12) Incorporated by reference from Loral CyberStar's Annual Report on Form 10-K for fiscal year ended December 31, 1999. (13) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on October 26, 2001. (14) Incorporated by reference from Loral CyberStar's Registration Statement No. 333-19167 on Form S-1. (15) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on August 6, 1999. (16) Incorporated by reference from Loral CyberStar's Registration Statement No. 33-80518. (17) Incorporated by reference to exhibit number 10.2 in Loral CyberStar's Registration Statement No. 333-19795 on Form S-4. (18) Incorporated by reference from Loral CyberStar's Current Report on Form 8-K filed on August 23, 1999. II-7 (19) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on August 13, 1996. (20) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on November 20, 2000. (21) Incorporated by reference from Loral Space's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. (22) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on July 8, 1997. (23) Incorporated by reference from the Loral Space's Annual Report on Form 10-K for the nine month period ended December 31, 1996. (24) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on December 9, 1997. (25) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on October 10, 1997. (26) Incorporated by reference from Loral Space's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. (27) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on May 3, 2000. All other schedules have been omitted because they are not applicable or are not required or the required information is included in the financial statements or notes thereto. ITEM 22. UNDERTAKINGS. The undersigned registrants hereby undertake that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the registrants' annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants, pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by any such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether or not such indemnification is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication to such issue. The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-8 LORAL CYBERSTAR, INC. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and the State of New York, on the 21st day of November, 2001. LORAL CYBERSTAR, INC. By: * ------------------------------------ Name: Bernard L. Schwartz Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board and Chief November 21, 2001 ------------------------------------------------ Executive Officer Bernard L. Schwartz * President and Director November 21, 2001 ------------------------------------------------ W. Neil Bauer * Executive Vice President and November 21, 2001 ------------------------------------------------ Director Eric J. Zahler * First Senior Vice President and November 21, 2001 ------------------------------------------------ Director Michael P. DeBlasio * Senior Vice President and Chief November 21, 2001 ------------------------------------------------ Financial Officer Richard J. Townsend * Vice President and Controller November 21, 2001 ------------------------------------------------ Harvey B. Rein * Director November 21, 2001 ------------------------------------------------ George Baker * Director November 21, 2001 ------------------------------------------------ Daniel Hirsch /s/ ERIC J. ZAHLER November 21, 2001 ------------------------------------------------ * Attorney-in-Fact
II-9 LORAL SPACE & COMMUNICATIONS LTD. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and the State of New York, on the 21st day of November, 2001. LORAL SPACE & COMMUNICATIONS LTD. By: * ------------------------------------ Name: Bernard L. Schwartz Title:Chairman of the Board, Chief Executive Officer and Director Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board, Chief November 21, 2001 ------------------------------------------------ Executive Officer and Director Bernard L. Schwartz * President, Chief Operating November 21, 2001 ------------------------------------------------ Officer and Director Eric J. Zahler * Chief Financial Officer and November 21, 2001 ------------------------------------------------ Senior Vice President Richard J. Townsend * Vice President and Controller November 21, 2001 ------------------------------------------------ Harvey B. Rein * Director November 21, 2001 ------------------------------------------------ Howard Gittis * Director November 21, 2001 ------------------------------------------------ Robert B. Hodes * Director November 21, 2001 ------------------------------------------------ Gershon Kekst * Director November 21, 2001 ------------------------------------------------ Charles Lazarus
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SIGNATURE TITLE DATE --------- ----- ---- * Director November 21, 2001 ------------------------------------------------ Malvin A. Ruderman * Director November 21, 2001 ------------------------------------------------ E. Donald Shapiro * Director November 21, 2001 ------------------------------------------------ Arthur L. Simon * Director November 21, 2001 ------------------------------------------------ Daniel Yankelovich /s/ AVI KATZ November 21, 2001 ------------------------------------------------ * Attorney-in-Fact
II-11 LORAL ASIA PACIFIC SATELLITE (HK) LIMITED SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and the State of New York, on the 21st day of November, 2001. LORAL ASIA PACIFIC SATELLITE (HK) LIMITED By: * ------------------------------------ Name: Bernard L. Schwartz Title: Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board, Chief November 21, 2001 ------------------------------------------------ Executive Officer Bernard L. Schwartz * President, Chief Operating November 21, 2001 ------------------------------------------------ Officer and Director Eric J. Zahler * Vice President, Secretary November 21, 2001 ------------------------------------------------ and Director Avi Katz * Senior Vice President November 21, 2001 ------------------------------------------------ and Chief Financial Officer Richard J. Townsend * Vice President November 21, 2001 ------------------------------------------------ and Controller Harvey B. Rein /s/ AVI KATZ November 21, 2001 ------------------------------------------------ * Attorney-in-Fact
II-12
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 2.1 Agreement and Plan of Merger, dated as of October 7, 1997, by and among Orion, Loral Space and Loral Satellite Corporation(1) 2.2 Principal Stockholder Agreement among Orion, Loral Space, Loral Satellite Corporation and the stockholders that are signatories thereto, dated as of October 7, 1997(2) 2.3 Amendment No. 1 to Agreement and Plan of Merger, dated as of February 11, 1998, by and among Orion, Loral Space and Loral Satellite Corporation(3) 2.4 Amendment No. 1 to Principal Stockholder Agreement among Orion, Loral Space, Loral Satellite Corporation and the stockholders that are signatories thereto, dated as of December 1, 1997(4) 2.5 Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996, among Loral Corporation, Loral Aerospace Holdings, Inc., Loral Aerospace Corp., Loral General Partner, Inc., Loral Globalstar L.P., Loral Globalstar Limited, Loral Space and Lockheed Martin Corporation(5) 2.6 Amendment to Loral Space Restructuring, Financing and Distribution Agreement, dated as of April 15, 1996(5) 2.7 Agreement for the Purchase and Sale of Assets dated as of September 25, 1996 by and between AT&T Corp., as Seller, and Loral Space, as Buyer(6) 2.8 First Amendment to Agreement for the Purchase and Sale of Assets dated as of March 14, 1997 by and between AT&T Corp., as Seller, and Loral Space, as Buyer(7) 2.9 Agreement and Plan of Merger dated as of October 7, 1997 by and among Orion Network Systems, Inc., Loral Space and Loral Satellite Corporation(8) 2.10 First Amendment to Agreement and Plan of Merger dated as of February 11, 1998 by and among Orion Network Systems, Inc., Loral Space and Loral Satellite Corporation(9) 2.11 Second Amendment to Agreement and Plan of Merger dated as of March 20, 1998 by and among Orion Network Systems, Inc., Loral Space and Loral Satellite Corporation(10) 3.1 Certificate of Merger of Loral Satellite Corporation into Orion dated March 20, 1998 and Exhibit A thereto, Restated Certificate of Incorporation of Loral CyberStar(11) 3.2 Certificate of Merger of Loral CyberStar, Inc. into Loral Orion Services, Inc.(12) 3.3 Merger Agreement between Loral CyberStar, Inc. and Loral Orion Services, Inc.(12) 3.4 Certificate of Loral CyberStar and amendments thereto(12) 3.5 Amended and Restated By-Laws of Loral CyberStar(12) 3.6 Memorandum of Association of Loral Space(5) 3.7 Memorandum of Increase in Share Capital of Loral Space(5) 3.8 Amended and Restated Bye-Laws of Loral Space(12) 3.9 Third Amended and Restated Bye-Laws of Loral Space(13) 3.10 Schedule IV to the Third Amended and Restated Bye-Laws of Loral Space(13) 4.1 Form of Orion Collateral Pledge and Security Agreement(14) 4.2 Form of Orion Senior Note Indenture, dated January 31, 1997, and Form of Note included therein(14) 4.3 Form of Orion Senior Discount Note Indenture, dated January 31, 1997 and Form of Note included therein(14) 4.4+ Form of Supplemental Indenture to Senior Note Indenture, dated January 31, 1997 4.5+ Form of Supplemental Indenture to Senior Discount Note Indenture, dated January 31, 1997 4.6 Indenture, dated January 15, 1999, by and between Loral Space and The Bank of New York, as trustee(15)
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 4.7+ Form of Indenture by and among Loral CyberStar, Loral Space and Loral Asia Pacific Satellite (HK) Limited and Bankers Trust Company, as trustee, and form of 10% Senior Notes due 2006, included therein 4.8+ Form of Guaranty Agreement between Loral Space and Bankers Trust Company, as trustee 4.9+ Form of Warrant Agreement to purchase shares of common stock of Loral Space between Loral Space and The Bank of New York as Warrant Agent 4.10 Rights Agreement dated March 27, 1996 between Loral Space and The Bank of New York, Rights Agent(5) 5.1+ Opinion of Willkie Farr & Gallagher regarding the legality of the securities being registered by Loral CyberStar 5.2+ Opinion of Appleby, Spurling & Kempe regarding the legality of the securities being registered by Loral Space 8.1+ Opinion of Willkie Farr & Gallagher regarding certain federal income tax considerations 8.2+ Opinion of Appleby, Spurling & Kempe regarding certain Bermuda tax considerations for Loral Space 10.1 Second Amended and Restated Purchase Agreement, dated September 26, 1991 ("Satellite Contract") by and between OrionSat and British Aerospace PLC and the First Amendment, dated as of September 15, 1992, Second Amendment, dated as of November 9, 1992, Third Amendment, dated as of March 12, 1993, Fourth Amendment, dated as of April 15, 1993, Fifth Amendment, dated as of September 22, 1993, Sixth Amendment, dated as of April 6, 1994, Seventh Amendment, dated as of August 9, 1994, Eighth Amendment, dated as of December 8, 1994, and Amendment No. 9 dated October 24, 1995, thereto. [CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THESE DOCUMENTS.](16) 10.2 Restated Amendment No. 10, dated December 10, 1996, between Orion Atlantic and Matra Marconi Space, to the Second Amended and Restated Purchase Agreement, dated September 26, 1991 by and between OrionSat and British Aerospace PLC(17) 10.3 Contract for a Satellite Control System, dated December 7, 1992 by and between Loral Orion Services, Inc., Telespazio S.p.A. and Martin Marietta Corporation. [CONFIDENTIAL TREAT- MENT HAS BEEN GRANTED FOR PORTIONS OF THIS DOCUMENT.](16) 10.4 Credit Agreement, dated as of November 23, 1993, by and between Orion Atlantic, OrionSat and General Electric Capital Corporation ("GECC"). [CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THIS DOCUMENT.](16) 10.5 Security Agreement, dated as of November 23, 1993, by and between Orion Atlantic, OrionSat and GECC(16) 10.6 Assignment and Security Agreement, dated as of November 23, 1993, by and between Orion Atlantic, OrionSat and GECC(16) 10.7 Consent and Agreement, dated as of November 23, 1993, by and between Orion Atlantic, Martin Marietta Corporation and GECC(16) 10.8 Deed of Trust, dated as of November 23, 1993, by and between Orion Atlantic, W. Allen Ames, Jr. and Michael J. Schwel, as Trustees, and GECC(16) 10.9 Lease Agreement, dated as of November 23, 1993, by and between OrionNet, Inc. and Orion Atlantic, as amended by an Amendment, dated January 3, 1995 [CONFIDENTIAL TREATMENT HAS BEEN GRANTED FOR PORTIONS OF THESE DOCUMENTS.](16) 10.10 Note for Interim Loans, dated as of November 23, 1993, by and between Orion Atlantic and GECC(16)
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.11 Lease Agreement, dated as of October 2, 1992, by and between OrionNet and Research Grove Associates, as amended by Amendment No. 1, dated March 26, 1993, Amendment No. 2, dated August 23, 1993, and Amendment No. 3, dated December 20, 1993(16) 10.12 Restated Definitive Agreement, dated October 29, 1998, by and between Orion and Republic of the Marshall Islands [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT.](11) 10.13 Orion-Z Spacecraft Purchase Contract, dated May 15, 1998, by and between Loral Orion Services, Inc. and Loral Skynet(11) 10.14 Lockup Agreement, dated October 15, 2001, between Loral CyberStar and certain bondholders defined therein(8) 10.15 Agreement, dated January 1, 1999, by and between Loral Orion Services, Inc. and Loral Skynet(11) 10.16 Lease Agreement, dated as of August 18, 1999 by and between Loral Asia Pacific Satellite (HK) Limited and APT Satellite Company Limited(18) 10.17 Shareholders Agreement dated as of April 23, 1996 between Loral Corporation and Loral Space(5) 10.18 Amended Shareholders Agreement dated as of March 29, 2000 between Loral Space and Lockheed Martin Corporation(13) 10.19 Tax Sharing Agreement dated as of April 22, 1996 between Loral Corporation, Loral Space, Lockheed Martin Corporation and LAC Acquisition Corporation(5) 10.20 Exchange Agreement dated as of April 22, 1996 between Loral Space and Lockheed Martin Corporation(5) 10.21 Amended and Restated Agreement of Limited Partnership of Globalstar, L.P., dated as of January 26, 1999 among Loral/Qualcomm Satellite Services, L.P., Globalstar Telecommunications Limited, AirTouch Satellite Services, Inc., Dacom Corporation, Dacom International, Inc., Hyundai Corporation, Hyundai Electronics Industries Co., Loral/DASA Globalstar, L.P., Loral Space, San Giorgio S.p.A., TeleSat Limited, TE.S.AM and Vodafone Satellite Services Limited(15) 10.22.1 Amendment dated as of December 8, 1999 to the Amended and Restated Agreement of Limited Partnership of Globalstar, L.P.(18) 10.22.2 Amendment dated as of February 1, 2000 to the Amended and Restated Agreement of Limited Partnership of Globalstar, L.P.(13) 10.23 Service Provider Agreements by and between Globalstar, L.P. and each of Loral General Partner, Inc. and Loral/DASA Globalstar, L.P.(19) 10.24 Contract between Globalstar, L.P. and Space Systems/Loral, Inc.(19) 10.25 Loral Space 1996 Stock Option Plan(5) 10.26.1 Amendment to Loral Space 1996 Stock Option Plan(15) 10.26.2 Loral Space 2000 Stock Option Plan(20) 10.26.3 Amendment No. 1 to Loral Space 2000 Stock Option Plan(21) 10.26.4 Amendment No. 2 to Loral Space 2000 Stock Option Plan(21) 10.26.5+ Amendment No. 3 to Loral Space 2000 Stock Option Plan 10.27 Loral Space Common Stock Purchase Plan for Non-Employee Directors(5) 10.28 Employment Agreement between Loral Space and Bernard L. Schwartz(5) 10.29.1 Amendment dated as of March 1, 1998 to Employment Agreement between Loral Space and Bernard L. Schwartz(10) 10.29.2 Amendment dated as of July 18, 2000 to Employment Agreement between Loral Space and Bernard L. Schwartz(21)
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.30 Registration Rights Agreement dated as of August 9, 1996 among Loral Space, Lehman Brothers Capital Partners II, L.P., Lehman Brothers Merchant Banking Portfolio Partnership L.P., Lehman Brothers Offshore Investment Partnership L.P. and Lehman Brothers Offshore Investment Partnership-Japan L.P.(22) 10.31 Registration Rights Agreement dated November 6, 1996 relating to Loral Space's 6% Convertible Preferred Equivalent Obligations due 2006(23) 10.32 Registration Rights Agreement (Series C Preferred Stock) dated as of March 31, 1997 between Loral Space and Finmeccanica S.p.A. and dated as June 23, 1997 among Loral Space, Aerospatiale SNI and Alcatel Espace(24) 10.33 Registration Rights Agreement (Common Stock) dated as of June 23, 1997 among Loral Space, Aerospatiale SNI and Alcatel Espace(24) 10.34 Alliance Agreement dated as of June 23, 1997 among Loral Space, Aerospatiale SNI, Alcatel Espace and Finmeccanica S.p.A.(24) 10.35 Principal Stockholder Agreement dated as of October 7, 1997 among Loral Space, Loral Satellite Corporation, Orion Network Systems, Inc. and certain Orion stockholders signatory thereto(25) 10.36.0 Amended and Restated Credit and Participation Agreement, dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/Loral, Inc. and the banks parties thereto, Bank of America National Trust and Savings Association, as Administrative Agent, and Istituto Bancario San Paolo di Torino S.p.A., individually and as Italian Export Financing and Arranger and as Selling Bank(26) 10.37.1 First Amendment dated as of May 7, 1998 to and of the Amended and Restated Credit and Participation Agreement, dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/Loral, Inc. and the banks parties thereto(15) 10.37.2 Second Amendment dated as of September 4, 1998 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Sys- tems/Loral, Inc. and the banks parties thereto(13) 10.37.3 Third Amendment dated as of July 12, 1999 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/Loral, Inc. and the banks parties thereto(13) 10.37.4 Fourth Amendment dated as of November 10, 1999 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/ Loral, Inc. and the banks parties thereto(13) 10.37.5 Fifth Amendment dated as of December 15, 2000 to and of the Amended and Restated Credit Agreement dated as of November 14, 1997, among Loral SpaceCom Corporation, Space Systems/ Loral, Inc. and the banks parties thereto(21) 10.38 Agreement of Limited Partnership of CyberStar, L.P. dated as of June 30, 1997(10) 10.39 Purchase and Sale Agreement dated November 17, 1997 between the Federal Government of the United Mexican States and Corporativo Satelites Mexicanos, S.A. de C.V. for the purchase and sale of the capital stock of Satelites Mexicanos, S.A. de C.V. (English translation of Spanish original)(10) 10.40 Amended and Restated Membership Agreement dated and effective as of August 21, 1998 among Loral Satmex Space and Ediciones Enigma, S.A. de C.V. and Firmamento Mexicano, S. de R.L. de C.V.(15)
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.41 Letter Agreement dated December 29, 1997 between Loral Space, Telefonica Autrey, S.A. de C.V., Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc. and Lehman Commercial Paper Inc. and related Agreement between the Federal Government of United Mexican States, Telefonica Autrey, S.A. de C.V., Ediciones Enigma, S.A. de C.V., Loral Space, Loral Satmex Space and Servicios Corporativos Satelitales, S.A. de C.V.(10) 10.42 Shareholders Agreement dated December 7, 1998 by and among Alcatel SpaceCom, Loral Space, Dr. Jurgen Schulte-Hillen and EuropeStar Limited(15) 10.43 Registration Rights Agreement dated as of January 21, 1999 relating to Loral Spaces 9 1/2% Senior Notes due 2006(15) 10.44 Lease Agreement dated as of August 18, 1999 by and between Loral Asia Pacific Satellite (HK) Limited and APT Satellite Company Limited(25) 10.45 Registration Rights Agreement dated as of February 18, 2000 relating to Loral Space's 6% Series D Convertible Redeemable Preferred Stock due 2007(13) 10.46 Fee Agreement dated as of April 19, 1996 by and among Globalstar, Globalstar Telecommunications Limited, Loral Corporation, Loral Space, Qualcomm Limited Partner, Inc., Space Systems/ Loral, Inc. and DASA Globalstar Limited Partner, Inc.(28) 10.47 Intercreditor Agreement dated as of April 19, 1996 by and among Globalstar, Globalstar Telecommunications Limited, Loral Corporation, Loral Space, Qualcomm Limited Partner, Inc., Space Systems/Loral, Inc. and DASA Globalstar Limited Partner, Inc.(28) 10.48 Credit Agreement dated as of November 17, 2000 by and among Loral Satellite, Inc., Bank of America, National Association, Bank of America Securities LLC, Credit Lyonnais and Lehman Commercial Paper, Inc.(29) 10.49 Guaranty dated as of November 17, 2000 made by Loral Space(29) 10.50 Assignment, Amendment and Release Agreement dated as of November 17, 2000 by and among the lenders parties to the Globalstar Credit Agreement, Loral Satellite, Inc., Loral Satcom Space, Loral Space, Loral Space & Communications Corporation, Globalstar, L.P. and Bank of America, National Association(29) 10.51 Amended and Restated Collateral Agreement dated as of November 17, 2000 by and among Loral Satellite, Inc. and Bank of America, National Association(29) 10.52 Form of Employment Protection Agreement(21) 12.0* Statement re: Loral CyberStar computation of ratio of earnings to fixed charges. 12.1* Statement re: Loral Space computation of ratio of earnings to fixed charges. 21.1 List of subsidiaries of the Loral CyberStar(21) 21.2 List of subsidiaries of the Loral Space(21) 23.1 Consent of Willkie Farr & Gallagher (included in Exhibits 5.1 and 8.1) 23.2 Consent of Appleby, Spurling & Kempe (included in Exhibits 5.2 and 8.2) 23.3+ Consent of Deloitte & Touche LLP 23.4+ Consent of Deloitte & Touche LLP 23.5+ Consent of Deloitte & Touche LLP 24.1* Powers of Attorney (included on the signature pages of the Registration Statement). 25.1* Statement on Form T-1 of Eligibility of Trustee. 99.1+ Form of Consent and Letter of Transmittal
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 99.2+ Form of Notice of Guaranteed Delivery 99.3+ Form of Letter to Clients 99.4+ Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and other Nominees
- --------------- + Filed herewith * Previously filed (1) Incorporated by reference to exhibit number 2.1 in Loral CyberStar's Current Report on Form 8-K dated October 9, 1997. (2) Incorporated by reference to exhibit number 2.2 in Loral CyberStar's Current Report on Form 8-K dated October 9, 1997. (3) Incorporated by reference to exhibit number 2.2 in Loral CyberStar's Registration Statement No. 333-46407 on Form S-4. (4) Incorporated by reference from Annual Report on Loral CyberStar's Form 10-K for fiscal year ended December 31, 1997. (5) Incorporated by reference from Loral Space's Registration Statement on Form 10 (No. 1-14180). (6) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on September 27, 1996. (7) Incorporated by reference from Loral Space's Current Report on Form 8-K on March 28, 1997. (8) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on October 26, 2001. (9) Incorporated by reference from Loral Space's Registration Statement on Form S-4 filed on February 17, 1998 (File No. 333-46407). (10) Incorporated by reference from Loral Space's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. (11) Incorporated by reference from Loral CyberStar's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. (12) Incorporated by reference from Loral CyberStar's Annual Report on Form 10-K for fiscal year ended December 31, 1999. (13) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on October 26, 2001. (14) Incorporated by reference from Loral CyberStar's Registration Statement No. 333-19167 on Form S-1. (15) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on August 6, 1999. (16) Incorporated by reference from Loral CyberStar's Registration Statement No. 33-80518. (17) Incorporated by reference to exhibit number 10.2 in Loral CyberStar's Registration Statement No. 333-19795 on Form S-4. (18) Incorporated by reference from Loral CyberStar's Current Report on Form 8-K filed on August 23, 1999. (19) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on August 13, 1996. (20) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on November 20, 2000. (21) Incorporated by reference from Loral Space's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. (22) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on July 8, 1997. (23) Incorporated by reference from the Loral Space's Annual Report on Form 10-K for the nine month period ended December 31, 1996. (24) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on December 9, 1997. (25) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on October 10, 1997. (26) Incorporated by reference from Loral Space's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. (27) Incorporated by reference from Loral Space's Current Report on Form 8-K filed on May 3, 2000. EX-4.4 3 y54595a1ex4-4.txt FORM OF SUPPLEMENTAL INDENTURE EXHIBIT 4.4 THIS SUPPLEMENTAL INDENTURE NO. 1 dated as of December , 2001 (the "Supplemental Indenture") among Loral Cyberstar, Inc., (formerly) Orion Network Systems, Inc., a Delaware corporation, as Issuer, (the "Issuer"), the Subsidiary Guarantors party hereto, and Bankers Trust Company, a New York banking corporation, as trustee under the indenture referred to below (the "Trustee") to the Indenture dated as of January 31, 1997 (the "Original Indenture"). W I T N E S S E T H: WHEREAS, there has previously been executed and delivered to the Trustee an Indenture providing for the issuance of the Issuer's 11 1/4% Senior Notes due 2007 (the "Notes"); WHEREAS, the Issuer has solicited consents from the Holders of certain amendments (the "Amendments") to the Indenture; and WHEREAS, the Holders of a majority in aggregate principal amount of the outstanding Notes have consented to the Amendments in accordance with the provisions of Section 9.02 of the Indenture. NOW, THEREFORE, in consideration of the foregoing and of the mutual premises and covenants contained herein and for other good and valuable consideration, the parties hereto agree, for the equal and proportionate benefit of the respective Holders from time to time of the Notes, as follows: ARTICLE ONE AMENDMENT OF THE INDENTURE SECTION 1.01. AMENDMENTS TO THE INDENTURE. Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.12, 4.13, 4.14, 4.15, 4.18, 4.19, 5.01, 5.02, 6.01 and 6.02 of the Indenture and the penultimate paragraph of Section 11.01 of the Indenture are amended and restated in their entirety to read as set forth on Schedule 1 hereto. ARTICLE TWO MISCELLANEOUS SECTION 2.01. EFFECT. The provisions set forth in this Supplemental Indenture shall be deemed to be, and shall be construed as part of, the Indenture to the same extent as if set forth fully therein. All references to the Indenture in the Indenture or in any other agreement, document or instrument delivered in connection therewith or pursuant thereto shall be deemed to refer to the Indenture as amended by this Supplemental Indenture. Except as amended hereby, the Indenture shall remain in full force and effect. SECTION 2.02. TRUST INDENTURE ACT CONTROLS. If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision that is required by or deemed to be included in this Supplemental Indenture by the Trust Indenture Act (as such term is defined in the Indenture), the required or incorporated provision shall control. SECTION 2.03. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). SECTION 2.04. COUNTERPARTS. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be original, but such counterparts shall together constitute but one and the same instrument. SECTION 2.05. EFFECTIVENESS. This Supplemental Indenture shall not be effective until the time that is the later of (x) the time this Supplemental Indenture is executed and delivered by the Trustee and (y) the moment immediately prior to the original issue of the Issuer's 10% Senior Notes due 2006. SECTION 2.06. SEVERABILITY. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 2.07. EFFECT OF HEADINGS. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written. LORAL CYBERSTAR, INC. (formerly) ORION NETWORKS SYSTEMS, INC., ORION SATELLITE CORPORATION and ORION OLDCO SERVICES By: ------------------------------------ Name: Title: [LORAL CYBERSTAR GLOBAL SERVICES, INC.] (formerly) ORION ATLANTIC EUROPE, INC., ORION ASIA PACIFIC CORPORATION and ASIA PACIFIC SPACE & COMMUNICATIONS, LTD. By: ------------------------------------ Name: Title: ORIONNET, INC. (formerly) ORIONNET FINANCE CORPORATION By: ------------------------------------ Name: Title: 2 [ ] (formerly) INTERNATIONAL PRIVATE SATELLITE PARTNERS, L.P. By: ------------------------------------ Name: Title: BANKERS TRUST COMPANY, AS TRUSTEE By: ------------------------------------ Name: Title: 3 SCHEDULE 1 TO SUPPLEMENTAL INDENTURE NO. 1 AMENDMENTS TO THE INDENTURE SECTION 4.02. Intentionally omitted. SECTION 4.03. Intentionally omitted. SECTION 4.04. Intentionally omitted. SECTION 4.05. Intentionally omitted. SECTION 4.06. Intentionally omitted. SECTION 4.07. Intentionally omitted. SECTION 4.08. Intentionally omitted. SECTION 4.09. Intentionally omitted. SECTION 4.10. Intentionally omitted. SECTION 4.12. Intentionally omitted. SECTION 4.13. Intentionally omitted. SECTION 4.14. Intentionally omitted. SECTION 4.15. Intentionally omitted. SECTION 4.18. Intentionally omitted. SECTION 4.19. Intentionally omitted. SECTION 5.01. CONSOLIDATION, MERGER AND SALE OF ASSETS. Each of the Company and each Guarantor will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions), to, any Person or permit any Person to merge with or into the Company or any Guarantor unless: (i) the Company or any Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or Guarantor) formed by such consolidation or into which the Company or any Guarantor, as the case may be, is merged or that acquired or leased such property and assets of the Company or as any Guarantor, as the case may be, shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustees, all of the obligations of the Company or any Guarantor, as the case may be, on all of the Notes and under the Indenture; (ii) Intentionally omitted; (iii) Intentionally omitted; (iv) Intentionally omitted; (v) the Company or Guarantor, as the case may be, delivers to the Trustee an Officers' certificate and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with. SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or any sale, conveyance, transfer or other disposition of all of substantially all of the property and assets of the Company or any Guarantor, as the case may be, in accordance with Section 5.01 of this Indenture, the successor Person formed by such consolidation or into which the Company or such Guarantor is merged or to which such sale, conveyance, transfer or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor under this Indenture with the same effect as if such successor Person had been named as the Company or such Guarantor herein and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Notes. SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" shall occur with respect to the Notes if: (a) the Company defaults in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) the Company defaults in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) Intentionally omitted; (d) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in this Indenture or under the Notes (other than a default specified in clause (a) or (b) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount at maturity of the Notes; (e) Intentionally omitted; (f) Intentionally omitted; (g) Intentionally omitted; (h) Intentionally omitted; (i) the Note Guarantee shall cease to be, or shall be asserted in writing by the Company or any Guarantor not to be, in full force and effect or enforceable in accordance with their respective terms. (j) Intentionally omitted. SECTION 6.02. ACCELERATION. If an Event of Default occurs and is continuing under the Indenture, the Trustee of the Holders of at least 25% in aggregate principal amount at maturity of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the Accreted Value of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such Accreted Value of, premium, if any, and accrued interest shall be immediately due and payable. The penultimate of Section 11.01 is amended and restated in its entirety to read as follows: Each Guarantor hereby irrevocably defers, until the principal of, premium, if any, and interest on the Notes shall have been paid in full, any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of its obligations under its Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Company or any collateral which any such Holder or the Trustee on behalf of such Holder hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off of in any other manner, payment or security on account of such claim or other rights, except (a) each Transferred Guarantor shall not be subject to the foregoing limitations and (b) the Company and the Guarantors (other than Transferred Guarantors) shall, at the request of any Transferred Guarantor, indemnify such Transferred Guarantor for any amount (including guarantee payments) or expense incurred by such Transferred Guarantor under its Guarantee. If any amount shall be paid to any Guarantor (other than a Transferred Guarantor) in violation of the preceding sentence and the principal of, premium, if any, and accrued interests on the Notes shall not have been 2 paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee for the benefit of the Holders to be credited and applied upon the principal of, premium, if any, and accrued interest on the Notes. Each Guarantor acknowledges that it will receive direct and indirect benefits from the issuance of the Notes pursuant to this Indenture and that the waivers set forth in this Section 11.01 are knowingly made in contemplation of such benefits. As used herein, the term "Transferred Guarantor" refers to any Guarantor engaged in the data business the stock of which (or the stock of any direct or indirect owner of such stock) is transferred to a Person other than the Company or another Guarantor. 3 EX-4.5 4 y54595a1ex4-5.txt FORM OF SUPPLEMENTAL INDENTURE EXHIBIT 4.5 THIS SUPPLEMENTAL INDENTURE NO. 1 dated as of December , 2001 (the "Supplemental Indenture") among Loral Cyberstar, Inc., (formerly) Orion Network Systems, Inc., a Delaware corporation, as Issuer, (the "Issuer"), the Subsidiary Guarantors party hereto, and Bankers Trust Company, a New York banking corporation, as trustee under the indenture referred to below (the "Trustee") to the Indenture dated as of January 31, 1997 (the "Original Indenture"). W I T N E S S E T H: WHEREAS, there has previously been executed and delivered to the Trustee an Indenture providing for the issuance of the Issuer's 12 1/2% Senior Discount Notes due 2007 (the "Notes"); WHEREAS, the Issuer has solicited consents from the Holders of certain amendments (the "Amendments") to the Indenture; and WHEREAS, the Holders of a majority in aggregate principal amount of the outstanding Notes have consented to the Amendments in accordance with the provisions of Section 9.02 of the Indenture. NOW, THEREFORE, in consideration of the foregoing and of the mutual premises and covenants contained herein and for other good and valuable consideration, the parties hereto agree, for the equal and proportionate benefit of the respective Holders from time to time of the Notes, as follows: ARTICLE ONE AMENDMENT OF THE INDENTURE SECTION 1.01. AMENDMENTS TO THE INDENTURE. Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.12, 4.13, 4.14, 4.15, 4.18, 4.19, 5.01, 5.02, 6.01 and 6.02 of the Indenture and the penultimate paragraph of Section 10.01 of the Indenture are amended and restated in their entirety to read as set forth on Schedule 1 hereto. ARTICLE TWO MISCELLANEOUS SECTION 2.01. EFFECT. The provisions set forth in this Supplemental Indenture shall be deemed to be, and shall be construed as part of, the Indenture to the same extent as if set forth fully therein. All references to the Indenture in the Indenture or in any other agreement, document or instrument delivered in connection therewith or pursuant thereto shall be deemed to refer to the Indenture as amended by this Supplemental Indenture. Except as amended hereby, the Indenture shall remain in full force and effect. SECTION 2.02. TRUST INDENTURE ACT CONTROLS. If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision that is required by or deemed to be included in this Supplemental Indenture by the Trust Indenture Act (as such term is defined in the Indenture), the required or incorporated provision shall control. SECTION 2.03. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). SECTION 2.04. COUNTERPARTS. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be original, but such counterparts shall together constitute but one and the same instrument. SECTION 2.05. EFFECTIVENESS. This Supplemental Indenture shall not be effective until the time that is the later of (x) time this Supplemental Indenture is executed and delivered by the Trustee and (7) the moment immediately prior to the original issuance of the Issuer's 10% Senior Notes due 2006. SECTION 2.06. SEVERABILITY. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 2.07. EFFECT OF HEADINGS. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written. LORAL CYBERSTAR, INC. (formerly) ORION NETWORKS SYSTEMS, INC., ORION SATELLITE CORPORATION and ORION OLDCO SERVICES By: ------------------------------------ Name: Title: [LORAL CYBERSTAR GLOBAL SERVICES, INC.](formerly) ORION ATLANTIC EUROPE, INC., ORION ASIA PACIFIC CORPORATION and ASIA PACIFIC SPACE & COMMUNICATIONS, LTD. By: ------------------------------------ Name: Title: ORIONNET, INC. (formerly) ORIONNET FINANCE CORPORATION By: ------------------------------------ Name: Title: [ ] (formerly) INTERNATIONAL PRIVATE SATELLITE PARTNERS, L.P. By: ------------------------------------ Name: Title: 2 BANKERS TRUST COMPANY, AS TRUSTEE By: ------------------------------------ Name: Title: 3 SCHEDULE 1 TO SUPPLEMENTAL INDENTURE NO. 1 AMENDMENTS TO THE INDENTURE SECTION 4.02. Intentionally omitted. SECTION 4.03. Intentionally omitted. SECTION 4.04. Intentionally omitted. SECTION 4.05. Intentionally omitted. SECTION 4.06. Intentionally omitted. SECTION 4.07. Intentionally omitted. SECTION 4.08. Intentionally omitted. SECTION 4.09. Intentionally omitted. SECTION 4.10. Intentionally omitted. SECTION 4.12. Intentionally omitted. SECTION 4.13. Intentionally omitted. SECTION 4.14. Intentionally omitted. SECTION 4.15. Intentionally omitted. SECTION 4.18. Intentionally omitted. SECTION 4.19. Intentionally omitted. SECTION 5.01. CONSOLIDATION, MERGER AND SALE OF ASSETS. Each of the Company and each Guarantor will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions), to, any Person or permit any Person to merge with or into the Company or any Guarantor unless: (i) the Company or any Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or Guarantor) formed by such consolidation or into which the Company or any Guarantor, as the case may be, is merged or that acquired or leased such property and assets of the Company or as any Guarantor, as the case may be, shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustees, all of the obligations of the Company or any Guarantor, as the case may be, on all of the Notes and under the Indenture; (ii) Intentionally omitted; (iii) Intentionally omitted; (iv) Intentionally omitted; or (v) the Company or Guarantor, as the case may be, delivers to the Trustee an Officers' certificate and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with. SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or any sale, conveyance, transfer or other disposition of all of substantially all of the property and assets of the Company or any Guarantor, as the case may be, in accordance with Section 5.01 of this Indenture, the successor Person formed by such consolidation or into which the Company or such Guarantor is merged or to which such sale, conveyance, transfer or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor under this Indenture with the same effect as if such successor Person had been named as the Company or such Guarantor herein and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Notes. SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" shall occur with respect to the Notes if: (a) the Company defaults in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) the Company defaults in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) Intentionally omitted; (d) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in this Indenture or under the Notes (other than a default specified in clause (a) or (b) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount at maturity of the Notes; (e) Intentionally omitted; (f) Intentionally omitted; (g) Intentionally omitted; (h) Intentionally omitted; (i) the Note Guarantee shall cease to be, or shall be asserted in writing by the Company or any Guarantor not to be, in full force and effect or enforceable in accordance with their respective terms; or (j) Intentionally omitted. SECTION 6.02 ACCELERATION. If an Event of Default occurs and is continuing under the Indenture, the Trustee of the Holders of at least 25% in aggregate principal amount at maturity of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the Accreted Value of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such Accreted Value of, premium, if any, and accrued interest shall be immediately due and payable. The penultimate of Section 10.01 is amended and restated in its entirety to read as follows: Each Guarantor hereby irrevocably defers, until the principal of, premium, if any, and interest on the Notes shall have been paid in full, any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of its obligations under its Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Company or any collateral which any such Holder or the Trustee on behalf of such Holder hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off of in any other manner, payment or security on account of such claim or other rights, except (a) each Transferred Guarantor shall not be subject to the foregoing limitations and (b) the Company and the Guarantors (other than Transferred Guarantors) shall, at the request of any Transferred Guarantor, indemnify such Transferred Guarantor for any amount (including guarantee payments) or expense incurred by such Transferred Guarantor under its Guarantee. If any amount shall be paid to any Guarantor (other than a Transferred Guarantor) in violation of the preceding sentence and the principal of, premium, if any, and accrued interests on the Notes shall not have been paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held 2 in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee for the benefit of the Holders to be credited and applied upon the principal of, premium, if any, and accrued interest on the Notes. Each Guarantor acknowledges that it will receive direct and indirect benefits from the issuance of the Notes pursuant to this Indenture and that the waivers set forth in this Section 10.01 are knowingly made in contemplation of such benefits. As used herein, the term "Transferred Guarantor" refers to any Guarantor engaged in the data business the stock of which (or the stock of any direct or indirect owner of such stock) is transferred to a Person other than the Company or another Guarantor. 3 EX-4.7 5 y54595a1ex4-7.txt FORM OF INDENTURE EXHIBIT 4.7 LORAL CYBERSTAR, INC., AS ISSUER, LORAL ASIA PACIFIC SATELLITE (HK) LIMITED, AS SUBSIDIARY GUARANTOR AND BANKERS TRUST COMPANY, AS TRUSTEE ------------------------ SENIOR NOTES INDENTURE DATED AS OF DECEMBER [ ], 2001 ------------------------ 10% SENIOR NOTES DUE 2006 CROSS-REFERENCE TABLE
TIA SECTIONS INDENTURE SECTIONS - ------------ -------------------- sec.310(a)(1)............................................... 7.10 (a)(2)................................................. 7.10 (b).................................................... 7.03; 7.08 sec.311(a).................................................. 7.03 (b).................................................... 7.03 sec.312(a).................................................. 2.03 sec.313(a).................................................. 7.06 (c).................................................... 7.05; 7.06; 11.02 (d).................................................... 7.06 sec.314(a).................................................. 4.18; 7.05; 11.02 (a)(4)................................................. 4.16; 11.02 (c)(1)................................................. 11.03 (c)(2)................................................. 11.03 (e).................................................... 4.16; 11.04 sec.315(a).................................................. 7.01; 7.02 (b).................................................... 7.05; 11.02 (c).................................................... 7.01; 7.02 (d).................................................... 7.01; 7.02 (e).................................................... 6.11 sec.316(a)(1)(A)............................................ 6.05 (a)(1)(B).............................................. 6.04 (b).................................................... 6.07 (c).................................................... 9.03 sec.317(a)(1)............................................... 6.08 (a)(2)................................................. 6.09 (b).................................................... 2.05 sec.318(a).................................................. 11.01 (c).................................................... 11.01
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part of the Indenture. TABLE OF CONTENTS
PAGE ---- RECITALS OF THE COMPANY.................................................... ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions................................................. SECTION 1.02 Incorporation by Reference of Trust Indenture Act........... SECTION 1.03 Rules of Construction....................................... ARTICLE TWO THE NOTES SECTION 2.01 Form, Dating and Denominations.............................. SECTION 2.02 Execution and Authentication................................ SECTION 2.03 Registrar and Paying Agent.................................. SECTION 2.04 Holders to Be Treated as Owners; Payments................... SECTION 2.05 Paying Agent to Hold Money in Trust......................... SECTION 2.06 Holder Lists................................................ SECTION 2.07 Transfer and Exchange....................................... SECTION 2.08 Replacement Notes........................................... SECTION 2.09 Outstanding Notes........................................... SECTION 2.10 Treasury Notes.............................................. SECTION 2.11 Temporary Notes............................................. SECTION 2.12 Cancellation................................................ SECTION 2.13 Defaulted Interest.......................................... SECTION 2.14 CUSIP, CINS or ISIN Number.................................. SECTION 2.15 Deposit of Moneys........................................... SECTION 2.16 Issuance of Additional Notes................................ ARTICLE THREE REDEMPTION SECTION 3.01 Right of Redemption......................................... SECTION 3.02 Notices to Trustee.......................................... SECTION 3.03 Selection of Notes to Be Redeemed........................... SECTION 3.04 Notice of Redemption........................................ SECTION 3.05 Deposit of Redemption Price................................. SECTION 3.06 Payment of Notes Called for Redemption...................... SECTION 3.07 Notes Redeemed in Part...................................... ARTICLE FOUR COVENANTS SECTION 4.01 Payment of Notes............................................ SECTION 4.02 Issuances of Guarantees by New Restricted Subsidiaries...... SECTION 4.03 Limitation on Indebtedness.................................. SECTION 4.04 Limitation on Restricted Payments........................... SECTION 4.05 Intentionally Omitted....................................... SECTION 4.06 Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries
PAGE ---- SECTION 4.07 Limitation on Transactions with Shareholders and Affiliates.................................................. SECTION 4.08 Limitation on Liens......................................... SECTION 4.09 Limitation on Sale-Leaseback Transactions................... SECTION 4.10 Limitation on Asset Sales................................... SECTION 4.11 Maintenance of Office or Agency............................. SECTION 4.12 Repurchase of Notes upon a Change of Control................ SECTION 4.13 Existence................................................... SECTION 4.14 Payment of Taxes and Other Claims........................... SECTION 4.15 Maintenance of Properties and Insurance..................... SECTION 4.16 Compliance Certificates..................................... SECTION 4.17 Notice of Defaults.......................................... SECTION 4.18 Commission Reports and Reports to Holders................... SECTION 4.19 Waiver of Stay, Extension or Usury Laws..................... SECTION 4.20 Replacement Satellite....................................... SECTION 4.21 Rating...................................................... SECTION 4.22 Business Activities......................................... SECTION 4.23 Payments for Consent........................................ ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01 Merger, Consolidation, and Sale of Assets................... SECTION 5.02 Successor Substituted....................................... ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01 Events of Default........................................... SECTION 6.02 Acceleration................................................ SECTION 6.03 Other Remedies.............................................. SECTION 6.04 Waiver of Past Defaults..................................... SECTION 6.05 Control by Majority......................................... SECTION 6.06 Limitation on Suits......................................... SECTION 6.07 Rights of Holders to Receive Payment........................ SECTION 6.08 Collection of Indebtedness and Suits for Enforcement by Trustee..................................................... SECTION 6.09 Trustee May File Proofs of Claim............................ SECTION 6.10 Priorities.................................................. SECTION 6.11 Undertaking for Costs....................................... SECTION 6.12 Restoration of Rights and Remedies.......................... SECTION 6.13 Rights and Remedies Cumulative.............................. SECTION 6.14 Delay or Omission Not Waiver................................ SECTION 6.15 Payment of Make Whole Premium............................... ARTICLE SEVEN TRUSTEE SECTION 7.01 General..................................................... SECTION 7.02 Certain Rights of Trustee................................... SECTION 7.03 Individual Rights of Trustee................................
PAGE ---- SECTION 7.04 Trustee's Disclaimer........................................ SECTION 7.05 Notice of Default........................................... SECTION 7.06 Reports by Trustee to Holders............................... SECTION 7.07 Compensation and Indemnity.................................. SECTION 7.08 Replacement of Trustee...................................... SECTION 7.09 Successor Trustee by Merger, Etc............................ SECTION 7.10 Eligibility................................................. SECTION 7.11 Money Held in Trust......................................... SECTION 7.12 Withholding Taxes........................................... ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01 Termination of Company's Obligations........................ SECTION 8.02 Defeasance and Discharge of Indenture....................... SECTION 8.03 Defeasance of Certain Obligations........................... SECTION 8.04 Application of Trust Money.................................. SECTION 8.05 Repayment to Company........................................ SECTION 8.06 Reinstatement............................................... SECTION 8.07 Defeasance and Certain Other Events of Default.............. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01 Without Consent of Holders.................................. SECTION 9.02 With Consent of Holders..................................... SECTION 9.03 Revocation and Effect of Consent............................ SECTION 9.04 Notation on or Exchange of Notes............................ SECTION 9.05 Trustee to Sign Amendments, Etc............................. SECTION 9.06 Conformity with Trust Indenture Act......................... ARTICLE TEN GUARANTEE OF NOTES SECTION 10.01 Guarantee................................................... SECTION 10.02 Obligations Unconditional................................... SECTION 10.03 Notice to Trustee........................................... SECTION 10.04 This Article Not to Prevent Events of Default............... SECTION 10.05 Net Worth Limitation........................................ ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01 Trust Indenture Act of 1939................................. SECTION 11.02 Notices..................................................... SECTION 11.03 Certificate and Opinion as to Conditions Precedent.......... SECTION 11.04 Statements Required in Certificate or Opinion............... SECTION 11.05 Acts of Holders............................................. SECTION 11.06 Rules by Trustee, Paying Agent or Registrar................. SECTION 11.07 Payment Date Other Than a Business Day......................
PAGE ---- SECTION 11.08 Governing Law............................................... SECTION 11.09 No Adverse Interpretation of Other Agreements............... SECTION 11.10 No Recourse Against Others.................................. SECTION 11.11 Successors.................................................. SECTION 11.12 Duplicate Originals......................................... SECTION 11.13 Separability................................................ SECTION 11.14 Table of Contents, Headings, Etc............................ EXHIBIT A Form of Global Note......................................... EXHIBIT B Form of Certificated Note................................... EXHIBIT C Form of Supplemental Indenture to Be Delivered by Subsidiary Guarantors.................................................. EXHIBIT D Form of Loral Space Guaranty................................
INDENTURE, dated as of December [ ], 2001, between LORAL CYBERSTAR, INC., a Delaware corporation, as issuer (together, with its successors and assigns, the "Company"); Loral Asia Pacific Satellite (HK) Limited, a corporation with limited liability organized under the laws of Hong Kong, as a Subsidiary Guarantor; and BANKERS TRUST COMPANY, a New York banking corporation, as trustee (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its 10% Senior Notes Due 2006 (the "Notes") issuable as provided in this Indenture. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done, and the Company has done all things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee hereunder and duly issued by the Company, the valid obligations of the Company as hereinafter provided. This Indenture is subject to, and shall be governed by, the provisions of the United States Trust Indenture Act of 1939, as amended, that are required to be a part of and to govern indentures qualified under the United States Trust Indenture Act of 1939, as amended. For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the Company, each Subsidiary Guarantor and the Trustee mutually covenant and agree, for the equal and proportionate benefit of all Holders, as follows. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition by a Restricted Subsidiary and not Incurred in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary or such Asset Acquisition. "ADJUSTED CONSOLIDATED NET INCOME" means, for any period, the aggregate net income (or loss) of the Company and its Subsidiaries for such period determined in conformity with GAAP; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (i) the net income (or loss) of any Person (other than net income (or loss) attributable to a Restricted Subsidiary) in which any Person (other than the Company or any of its Restricted Subsidiaries) has a joint interest and the net income (or loss) of any Unrestricted Subsidiary, except that Adjusted Consolidated Net Income for any period shall include the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries by such other Person or such Unrestricted Subsidiary during such period; (ii) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of paragraph (a) of Section 4.04 of this Indenture (and, in such case, except to the extent includible pursuant to clause (i) above), the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; (iii) any gains or losses (on an after-tax basis) attributable to Asset Sales; (iv) except for purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of paragraph (a) of Section 4.04 of this Indenture, any amount paid or accrued as dividends on Preferred Stock of the Company or any Restricted Subsidiary owned by Persons other than the Company and any of its Restricted Subsidiaries; (v) all extraordinary gains and extraordinary losses; (vi) any net income (or loss) of any Subsidiary Guarantor that ceases to be a Subsidiary Guarantor because it is designated an Unrestricted Subsidiary; and (vii) the Interest Amortization Credit. "ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets of the Company and its Restricted Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of the Company and its Restricted Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, prepared in conformity with GAAP and filed with the Commission pursuant to Section 4.18 of this Indenture. "AFFILIATE" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "AGENT" means any Registrar, Paying Agent, authenticating agent or co-Registrar. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of beneficial interests in the Global Notes, the rules and procedures of the Depositary that apply to such transfer or exchange. "ASSET ACQUISITION" means (i) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries; provided that such Person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such investment or (ii) an acquisition by the Company or any of its Restricted Subsidiaries of the property and assets of any Person other than the Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person; provided that the property and assets acquired are related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such acquisition. "ASSET DISPOSITION" means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of any Restricted Subsidiary or (ii) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries. Asset Disposition shall not include the Data Business Transfer. "ASSET SALE" means any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any of its Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted Subsidiary, (ii) all or substantially all of the property and assets of an operating unit or business of the Company or any of its Restricted Subsidiaries or (iii) any other property and assets of the Company or any of its Restricted Subsidiaries outside the ordinary course of business of the Company or such Restricted Subsidiary and, in each case, that is not governed by Section 5.01 of this Indenture; provided that "Asset Sale" shall not include the Data Business Transfer. "AVERAGE LIFE" means, at any date of determination with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security and (b) the amount of such principal payment by (ii) the sum of all such principal payments. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee of such Board of Directors duly authorized to act with respect to this Indenture from time to time. 2 "BOARD RESOLUTION" means a copy of a resolution, certified by any Executive Officer or the Secretary or Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BUSINESS DAY" means a day except Saturday, Sunday or other day on which commercial banks in the City of New York, or in the city of the Corporate Trust Office of the Trustee, are authorized by law to close. "CALLED PRINCIPAL" means the principal amount of a Note to be redeemed pursuant to Section 3.01. "CAPITAL STOCK" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether now outstanding or issued after the Closing Date, including, without limitation, all of such Person's Common Stock and Preferred Stock. "CAPITALIZED LEASE" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person; and "Capitalized Lease Obligations" means the discounted present value of the rental obligations under such lease. "CERTIFICATED NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Sections 2.01, 2.07, 2.08 and 2.16 hereof, substantially in the form of Exhibit B hereto. "CHANGE OF CONTROL" means such time as (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power of the issued and outstanding Voting Stock of Loral Space; (ii) Loral Space shall not directly or indirectly own all of the Capital Stock of the Company; (iii) individuals who on the Closing Date constitute the Board of Directors of Loral Space (together with any new directors whose election by the Board of Directors of Loral Space or whose nomination for election by Loral Space's stockholders was approved by a vote of at least a majority of the members of the Board of Directors of Loral Space then in office who either were members of the Board of Directors of Loral Space on the Closing Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors of Loral Space then in office; and (iv) any change in control (or similar event, however denominated) with respect to Loral Space shall occur under and as defined in any indenture or agreement in respect of Indebtedness in an aggregate principal amount in excess of $10,000,000 to which Loral Space is a party, including the indenture relating to Loral Space's 9 1/2% Senior Notes due 2006. "CHIEF EXECUTIVE OFFICER" of the Company means the chief executive officer or, in the event of his termination or inability to perform his duties, such other Executive Officer of the Company as the Company may designate. "CLOSING DATE" means the date on which the Notes are originally issued under the Indenture. "COMMISSION" means the United States Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the TIA, then the body performing such duties at such time. "COMMON STOCK" means, the shares of Common Stock, par value $.01 per share, of the Company. "COMPANY" means the party named as such in the first paragraph of this Indenture until a successor replaces it pursuant to Article Five of this Indenture and thereafter means such successor. "COMPANY ORDER" means a written request or order signed in the name of the Company (i) by the Chief Executive Officer or another Executive Officer and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of 3 being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "CONSOLIDATED EBITDA" means, for any period, the sum of the amounts for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest Expense, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income, (iii) income taxes, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income (other than income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales of assets), (iv) depreciation expense, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income, (v) amortization expense, to the extent such amount was deducted in calculating Adjusted Consolidated Net Income, and (vi) all other non-cash items or impairments reducing Adjusted Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be made), less all non-cash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, the aggregate amount of interest in respect of Indebtedness (excluding the Interest Amortization Credit, but including, without limitation, amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; the net costs associated with Interest Rate Agreements; and interest in respect of Indebtedness that is Guaranteed or secured by the Company or any of its Restricted Subsidiaries) and all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be accrued by the Company and its Restricted Subsidiaries during such period; excluding, however, any premiums, fees and expenses (and any amortization thereof) payable in connection with the offering of the Notes, all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. "CONSOLIDATED LEVERAGE RATIO" means, on any Transaction Date, the ratio of (i) the aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries (excluding the Subordinated Intercompany Note and the Subordinated Subsidiary Guarantor Guaranties of the Subordinated Intercompany Note) on a consolidated basis outstanding on such Transaction Date to (ii) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarters for which financial statements of the Company have been filed with the Commission pursuant to Section 4.18 of this Indenture (such four fiscal quarter period being the "Four Quarter Period"); provided that (A) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur from the beginning of the Four Quarter Period through the Transaction Date (the "REFERENCE PERIOD"), as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and (B) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Dispositions) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such actions occurred when such Person was a Restricted Subsidiary as if such Asset Dispositions or Asset Acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (A) or (B) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed of for which financial information is available. "CONSOLIDATED NET WORTH" means, at any date of determination, stockholders' equity as set forth on the most recently available quarterly or annual consolidated balance sheet of the Company and its Restricted Subsidiaries (which shall be as of a date not more than 90 days prior to the date of such computation), less any amounts attributable to Disqualified Stock or any equity security convertible into or 4 exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with GAAP (excluding the effects of foreign currency exchange adjustments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 52). "CORPORATE TRUST OFFICE" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at Bankers Trust Company, 4 Albany Street, New York, N.Y. 10006. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in currency values. "DATA BUSINESS TRANSFER" means the transfer of the data services business of the Company and its Subsidiaries to Loral SpaceCom Corporation in exchange for a portion of the intercompany indebtedness owing by the Company to Loral SpaceCom Corporation on the Closing Date. "DEFAULT" means any event that is, or after notice or passage of time or both would be, an Event of Default. "DEPOSITARY" means The Depository Trust Company, its nominees and their respective successors, until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "DEPOSITARY" shall mean or include each Person who is then a Depositary hereunder. "DESIGNATED EQUITY PROCEEDS" means the amount of Net Cash Proceeds received by Loral Space after the Closing Date from the issuance and sale of Capital Stock (other than Disqualified Stock) of Loral Space to the extent such Net Cash Proceeds are ultimately contributed to the capital of the Company. "DISCOUNTED VALUE" means, with respect to any Called Principal of any Note, the discounted value of all Remaining Scheduled Payments with respect to the Called Principal from their respective scheduled due dates to the Redemption Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "DISQUALIFIED STOCK" means any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 4.10 and 4.12 of this Indenture and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provisions prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to Sections 4.10 and 4.12 of this Indenture. "EVENT OF DEFAULT" has the meaning provided in Section 6.01. "EXCESS CASH FLOW" means, for any period of determination, (i) Consolidated EBITDA for such period, less (ii) all capital expenditures, all cash taxes, all cash interest expense and bank fees, and all principal payments on the Notes, in each case actually made for such period, plus (iii) any non-cash restructuring or special charges taken during such period. "EXCESS CASH FLOW REDEMPTION PAYMENTS" has the meaning provided in Section 3.01(b). 5 "EXCESS PROCEEDS" has the meaning provided in Section 4.10. "EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as amended. "EXECUTIVE OFFICER" means the Chairman of the Board, Chief Executive Officer, President, any Vice President or any other officer that is considered by the Board of Directors to be an executive officer of the Company. "EXISTING NOTES" means the Company's 12- 1/2% Senior Discount Notes due 2007 and 11- 1/4% Senior Notes due 2007. "FAIR MARKET VALUE" means the price that would be paid in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations contained or referred to in the Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of the Indenture shall be made without giving effect to (i) the amortization of any expenses incurred in connection with the offering of the Notes and (ii) except as otherwise provided, the amortization or other impairment charges or writedowns of any amount required or permitted by Accounting Principles Board Opinion No. 16 "Business Combinations," APB No. 17 "Intangible Assets," Statement of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations," SFAS No. 142 "Goodwill and Other Intangible Assets" or SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." "GLOBAL NOTE" means the Global Notes, substantially in the form of Exhibit A hereto, issued in accordance with Sections 2.01, 2.07, 2.08 and 2.16 hereof. "GOVERNMENT SECURITIES" means direct obligations of, obligations fully guaranteed by, or participations in pools consisting solely of obligations of or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the option of the issuer thereof. "GUARANTEE" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and. without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "GUARANTEE" shall not include endorsements for collection or deposit in the ordinary course of business. The term Guarantee used as a verb has a corresponding meaning. "GUARANTORS" means, collectively, all Subsidiary Guarantors and the Parent Guarantor. "HOLDER" means, in the case of any Note, the Person in whose name such Note is registered in the Register. "INCUR" means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or 6 otherwise, such Indebtedness, including an "Incurrence" of Indebtedness by reason of a Person becoming a Restricted Subsidiary; provided that neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "INDEBTEDNESS" means, with respect to any Person at any date of determination (without duplication), (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in clause (i) or (ii) above or clause (v), (vi) or (vii) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by any such Person of a demand for reimbursement), (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (v) all obligations of such Person as lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness which is not so assumed shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise included in this definition, obligations under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that (A) the amount outstanding at any time with respect to any Indebtedness issued with original issue discount is the original issue price of such Indebtedness, (B) Permitted Customer Advances and Prepayment Supports shall be deemed not to be "Indebtedness" and (C) Indebtedness shall not include any liability for federal, state, local or other taxes. "INDENTURE" means this Indenture as originally executed or as it may be amended or supplemented from time to time by one or more indentures supplemental to this Indenture entered into pursuant to the applicable provisions of this Indenture. "INDEPENDENT FINANCIAL ADVISOR" means an investment banking firm, accounting firm or other financial advisory firm of national standing in the United States, as the case may be, (i) which, in the judgment of the Board of Directors, does not, and whose directors, officers or Affiliates do not, have a material direct or indirect financial interest in the Company (provided that ownership of Capital Stock of the Company constituting less than 2% of all outstanding Capital Stock of the Company shall not constitute a material direct or indirect financial interest), and (ii) which, in the judgment of the Board of Directors, is otherwise independent and qualified to perform the task for which it is to be engaged. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. "INTEREST AMORTIZATION CREDIT" means the reduction in interest expense resulting from the amortization of the difference between the carrying value of the Notes recorded upon issuance less the actual principal amount of the Notes. "INTEREST PAYMENT DATE" means each semiannual interest payment date of January 15 and July 15 of each year, commencing July 15, 2002. "INTEREST RATE AGREEMENT" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement designed to protect the Company or any of its Restricted Subsidiaries against fluctuations in interest rates 7 in respect of Indebtedness to or under which the Company or any of its Restricted Subsidiaries is a party or a beneficiary on the date of this Indenture or becomes a party or a beneficiary hereafter; provided that the notional principal amount thereof does not exceed the principal amount of the Indebtedness of the Company and its Restricted Subsidiaries that bears interest at floating rates. "INVESTMENT" in any Person means any direct or indirect advance, loan or other extension of credit (including, without limitation, by way of Guarantee or similar arrangement; but excluding advances to customers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable on the balance sheet of the Company, or its Restricted Subsidiaries) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes. debentures or other similar instruments issued by, such Person and shall include (i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary, including, without limitation, by reason of any transaction permitted by clause (iii) of Section 4.06 of this Indenture. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04 of this Indenture, (i) "Investment" shall include the fair market value of the assets (net of liabilities (other than liabilities to the Company or any of its Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of liabilities (other than liabilities to the Company or any of its Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be considered a reduction in outstanding Investments and (iii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer. "KINGSTON" means Kingston Communications International Limited, a company incorporated under the laws of England, and its successors and assigns. "LIEN" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to give any security interest). "LORAL SPACE" means Loral Space & Communications Ltd. "LORAL SPACE GUARANTY" means the Guaranty pursuant to the Loral Space Guaranty Agreement of the Company's obligations under the Notes and this Indenture, substantially in the form of Exhibit D hereto. "LORAL SPACE GUARANTY AGREEMENT" means the agreement whereby Loral Space undertakes the Loral Space Guaranty, dated even date herewith. "MAKE WHOLE PREMIUM" means, with respect to any Note, an amount (which in no event may be less than zero) equal to the excess, if any, of (x) the Discounted Value of the Called Principal over (y) the amount of such Called Principal. "MATRA" means Matra Marconi Space UK Limited, a company incorporated under the laws of England that is the parent company of MMS Space Systems, a subsidiary of Matra Marconi Space N.V. and the manufacturer under the Telstar 12 Satellite Contract. "MATURITY DATE" means the Stated Maturity of the Notes. "MOODY'S" means Moody's Investors Service, Inc. and its successors. "NET CASH PROCEEDS" means, (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) and proceeds from the conversion of other property received when 8 converted to cash or cash equivalents (including cash or cash equivalents that are deposited in escrow pending satisfaction of conditions specified in the relevant sale documents or that secures Prepayment Supports, in each case when such cash or cash equivalents are released to the Company or a Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (A) is secured by a Lien on the property or assets sold or (B) is required to be paid as a result of such sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary of the Company as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP and (b) with respect to any issue or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary of the Company) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney's fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "NOTES GUARANTY" means the Loral Space Guaranty and the Subsidiary Guaranties. "NOTES" means the Senior Notes due 2006 of the Company issued pursuant to this Indenture. "OFFER TO PURCHASE" means an offer to purchase Notes by the Company from the Holders commenced by mailing a notice to the Trustee and each Holder stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "PAYMENT DATE"); (iii) that any Note not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day immediately preceding the Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. On the Payment Date, the Company shall (i) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price of the Notes surrendered, and the Trustee, upon receipt of a Company Order, shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note 9 purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase. "OFFICER" means, with respect to the Company, (i) an Executive Officer or any Director of the Company or (ii) the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by one Officer listed in clause (i) of the definition thereof and one Officer listed in clause (ii) of the definition thereof; provided, however, that any such certificate may be signed by any two of the Officers listed in clause (i) of the definition thereof in lieu of being signed by one Officer listed in clause (i) of the definition thereof and one Officer listed in clause (ii) of the definition thereof. Each Officers' Certificate (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include the statements provided for in TIA Section 314(e), if applicable. "OPINION OF COUNSEL" means a written opinion signed by legal counsel who may be an employee of or outside counsel to the Company. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e), if applicable. "ORION ATLANTIC" means International Private Satellite Partners, L.P., a Delaware limited partnership. "PARENT GUARANTOR" means Loral Space & Communications Ltd. "PARTICIPANT" means, with respect to the Depositary or its nominee, an institution that has an account therewith. "PAYING AGENT" has the meaning provided in Section 2.03, except that, for the purposes of Article Eight, the Paying Agent shall not be the Company or a Subsidiary of the Company or an Affiliate of any of them. The term "Paying Agent" includes any additional Paying Agent. "PAYMENT DATE" means with respect to any Offer to Purchase, the date of purchase of the Notes pursuant thereto, which shall be a Business Day no earlier than 30 days nor later than 60 days from the date a notice is mailed pursuant to such Offer to Purchase. "PERMITTED CUSTOMER ADVANCES" means obligations of the Company or any Restricted Subsidiary to repay money received by the Company or such Restricted Subsidiary from customers as bona fide prepayment for services to be provided by, or purchases to be made from, the Company or such Restricted Subsidiary. "PERMITTED INVESTMENT" means (i) an Investment in the Company or a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary; provided that such person's primary business is related, ancillary or complementary to the businesses of the Company and its Restricted Subsidiaries on the date of such Investment, (ii) Temporary Cash Investments; (iii) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; and (iv) stock, obligations or securities received in satisfaction of judgments. "PERMITTED LIENS" means (i) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (ii) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other 10 appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Company or any of its Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon real or personal property acquired after the Closing Date; provided that (a) such Lien is created solely for the purpose of securing Indebtedness Incurred, in accordance with Section 4.03 of this Indenture, (1) to finance the cost (including the cost of improvement, transportation, development and design, installation, integration or construction) of the item of property or assets subject thereto and such Lien is created prior to, at the time of or within 6 months after the later of the acquisition, the completion of construction or the commencement of full operation of such property (or 60 days in the case of clause (i) of paragraph (a) of Section 4.03) or (2) to refinance any Indebtedness previously so secured, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such cost (plus, in the case of any refinancing Indebtedness referred to in clause (vi)(a)(2) above, premiums, accrued interest, fees and expenses), and (c) any Lien permitted by this clause shall not extend to or cover any property or assets other than such item of property or assets and any improvements on such item; (vii) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets; (ix) any interest or title of a lessor in the property subject to any Capitalized Lease or operating lease; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases permitted pursuant to clause (ix) above; (xi) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or such property becomes a part of, any Restricted Subsidiary; provided that such Liens (a) do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets so acquired and (b) were not incurred in contemplation of the acquisition thereof; (xii) Liens in favor of the Company or any Restricted Subsidiary; (xiii) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary of the Company that does not give rise to an Event of Default provided that any reserve or other appropriate provision that shall be required in conformity with GAAP shall have been made therefor; (xiv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xv) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xvi) Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Interest Rate Agreements and Currency Agreements and forward contracts, options, future contracts. futures options or similar agreements or arrangements designed solely to protect the Company or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities; (xvii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the Closing Date; (xviii) [intentionally omitted]; (xix) Liens (including Liens securing Prepayment Supports) on amounts of money or Temporary Cash Investments that each represent bona fide prepayments of at least $5 million on agreements for the long-term sale or lease of capacity on any satellite owned by the Company or a Restricted Subsidiary, but only to the extent that the amount of money or Temporary Cash Investments subject to any such Lien does not exceed the amount of such prepayment and reasonable interest thereon; (xx) Liens encumbering contracts between the Company or any Restricted Subsidiary and any third party customer relating to the use of a VSAT owned by the Company or any Restricted Subsidiary but only if, 11 and so long as, the Indebtedness secured by any such Lien is also secured by a Lien permitted under clause (vi) of this definition encumbering such VSAT; and (xxi) Liens upon a satellite and components thereof during the period in which such satellite is being constructed, provided that (a) such Liens (1) are for the benefit of only the manufacturer of such satellite or components and (2) secure only the obligation of the Company or any Restricted Subsidiary to pay the purchase price for such satellite or components and (b) such Liens are actually released upon, or prior to, the completion of construction of such satellite and prior to the launch or commencement of full operations of such satellite. "PERSON" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "PREFERRED STOCK" means, with respect to any Person. all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's preferred or preference stock, whether now outstanding or issued after the date of this Indenture, including, without limitation, all series and classes of such preferred or preference stock. "PREPAYMENT SUPPORT" means the reimbursement obligations of the Company or any Restricted Subsidiary in connection with any fully secured letter of credit or similar credit support issued by any third party in connection with the obligations of the Company or such Restricted Subsidiary to repay amounts received as bona fide prepayments of at least $5 million on agreements for the long-term sale or lease of capacity on a satellite owned by the Company or a Restricted Subsidiary. "REDEMPTION DATE," when used with respect to any Note to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "REDEMPTION PRICE," when used with respect to any Note to be redeemed, means the price at which such Note is to be redeemed pursuant to this Indenture. "REGISTER" has the meaning provided in Section 2.03. "REGISTRAR" has the meaning provided in Section 2.03. "REGULAR RECORD DATE" for the interest payable on any Interest Payment Date means the January 1 or July 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "REINVESTMENT YIELD" means 50 basis points over the yield to maturity implied by the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Redemption Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Redemption Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security having a maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security having a maturity closest to and less than the Remaining Average Life. "RELEASED INDEBTEDNESS" means, with respect to any Asset Sale, Indebtedness (i) which is owed by the Company or any Restricted Subsidiary (the "Obligors") prior to such Asset Sale, (ii) which is assumed by the purchaser or any affiliate thereof in connection with such Asset Sale and (iii) with respect to which the Obligors receive written, unconditional releases from each creditor, no later than the closing date of such Asset Sale. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Redemption Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. 12 "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Redemption Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Redemption Date is not a date on which interest payments are due to be made under the terms of the new notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Redemption Date and required to be paid on such Redemption Date. "REPLACEMENT SATELLITE" means the replacement satellite for the satellite known as Telstar 11. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means an officer within the Corporate Trust and Agency Group (or any successor or group of the Trustee), including vice president, assistant vice president, secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "RESTRICTED PAYMENTS" has the meaning provided in Section 4.04. "REPURCHASE OFFER" has the meaning ascribed thereto in the Warrant Agreement. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "S&P" means Standard & Poor's Ratings Group and its successors. "SECURITIES ACT" means the United States Securities Act of 1933, as amended. "SIGNIFICANT SUBSIDIARY" means, at any date of determination, any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, all as set forth on the most recently available consolidated financial statements of the Company for such fiscal year. "SPECIFIED DATE" means any Redemption Date, any Payment Date for an Offer to Purchase pursuant to Section 4.10 or Section 4.12 or any date on which the Securities are due and payable after an Event of Default. "STATED MATURITY" means, (i) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (ii) with respect to any scheduled installment of principal of or interest on any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable. "SUBORDINATED INTERCOMPANY NOTE" means the 10% subordinated promissory note due July 30, 2006 to be issued by the Company on the Closing Date to Loral SpaceCom Corporation in exchange for a portion of the intercompany indebtedness owed by us to Loral SpaceCom Corporation on the Closing Date. "SUBORDINATED LORAL SPACE GUARANTY" means the subordinated guaranty of the Subordinated Intercompany Note executed by Loral Space in favor of the holder of the Subordinated Intercompany Note. "SUBORDINATED SUBSIDIARY GUARANTOR GUARANTIES" means the subordinated guaranties of the Subordinated Intercompany Note executed by the Subsidiary Guarantors in favor of the holder of the Subordinated Intercompany Note. "SUBSIDIARY" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person. 13 "SUBSIDIARY GUARANTEE" means the Guarantee of the Notes by any Restricted Subsidiary, substantially in the form of Exhibit C hereto. "SUBSIDIARY GUARANTORS" means, collectively, all Restricted Subsidiaries; provided that any person that becomes an Unrestricted Subsidiary in compliance with the "Limitation on Restricted Payments" covenant shall not be included in "Subsidiary Guarantors" after becoming an Unrestricted Subsidiary and none of the Subsidiaries transferred as part of the Data Business Transfer shall be Subsidiary Guarantors. "SUCCESSFUL LAUNCH" means, with respect to any satellite, the placing into orbit of such satellite in its assigned orbital position with at least 40% of the transponder capacity fully operational. "TAX" means any tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and any other liabilities related thereto). "TAXING AUTHORITY" means any government or political subdivision or territory or possession of any government or any authority or agency therein or thereof having power to tax. "TELSTAR 10" means the satellite known as Telstar 10/Apstar IIR (formerly known as Orion 3), and any replacement for such satellite. "TELSTAR 11" means the satellite known as Telstar 11 (formerly known as Orion 1), and any replacement for such satellite. "TELSTAR 12" means the satellite known as Telstar 12 (formerly known as Orion 2), and any replacement for such satellite. "TELSTAR 11 SATELLITE CONTRACT" means the fixed price turnkey contract originally between British Aerospace Public Limited Company and Orion Atlantic for the design, construction, launch and delivery in orbit of Telstar 11. "TELSTAR 12 SATELLITE CONTRACT" means the spacecraft purchase agreement between us and Matra for construction and launch of Telstar 12. "TEMPORARY CASH INVESTMENT" means any of the following: (i) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, (ii) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, and (v) securities with maturities of six months or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or Moody's. "TIA" or "TRUST INDENTURE ACT" means the United States Trust Indenture Act of 1939, as amended (15 U.S. Code sec.sec. 77aaa-77bbb), as in effect on the date this Indenture was executed, except as provided in Section 9.06. 14 "TRADE PAYABLES" means, with respect to any Person, any accounts payable or any other debt or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services, in each case which is required to be paid within one year. "TRANSACTION DATE" means, with respect to the Incurrence of any Indebtedness by the Company or any of its Restricted Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "TRUSTEE" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of Article Seven of this Indenture and thereafter means such successor. "TT&C FINANCING" means the agreement, dated November 23, 1993, between General Electric Capital Corporation and Orion Atlantic, relating to borrowings by Orion Atlantic, which obligations have been assumed by the Company. "UNDERWRITERS" has the meaning as set forth in the Underwriting Agreement. "UNDERWRITING AGREEMENT" means the Underwriting Agreement dated January 28, 1997 between the Company and Morgan Stanley & Co. Incorporated, for itself and the other Underwriters named therein. "UNITS" has the meaning provided in the recitals to this Indenture. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Restricted Subsidiary (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation; (B) either (I) the Subsidiary to be so designated has total assets of $1,000 or less or (II) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04 of this Indenture, and (C) if applicable, the Incurrence of Indebtedness and the Investment referred to in clause (A) of this proviso would be permitted under Section 4.03 and Section 4.04 of this Indenture. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under the first paragraph of Section 4.03 of this Indenture and (y) no Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "VOTING STOCK" means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "VSAT" means very small aperture terminal earth stations that can be installed on rooftops or elsewhere, with antennas as small as 0.8 meters but ranging in sizes of up to 3.6 meters in diameter. "WARRANT AGREEMENT" has the meaning provided in the Recitals to the Agreement. "WARRANTS" means the warrants to purchase Common Stock of the Company issued as part of a unit with each of the Notes and the Senior Notes. "WHOLLY OWNED" means, with respect to any Subsidiary of any Person, the ownership, beneficially and of record, of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying 15 shares and Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the indenture securities means the Company, the Subsidiary Guarantors and any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule of the Commission and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and words in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (vii) all references to Sections, Articles or Exhibits refer to Sections, Articles or Exhibits of this Indenture unless otherwise indicated; and (viii) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections of the Securities Act or rules adopted by the Commission from time to time. ARTICLE TWO THE NOTES SECTION 2.01. FORM, DATING AND DENOMINATIONS. The Notes and the Trustee's certificate of authentication shall be substantially in the form annexed hereto as Exhibits A and B. The Notes may have notations, legends or endorsements required by law, stock exchange agreements or requirements to which the Company is subject or usage. The Company shall approve the form of the Notes and any notation, legend or endorsement on the Notes. Each Note shall be dated the date of its authentication. The terms and provisions contained in the form of the Notes annexed hereto as Exhibits A and B shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The Notes shall be issued initially in the form of one or more global notes in registered form, substantially in the form set forth in Exhibit A (the "GLOBAL NOTES"), deposited with, or on behalf of, the Depositary, and registered in the name of the nominee of the Depositary, duly executed by the Company 16 and authenticated by the Trustee as hereinafter provided. The Depositary shall credit on its book-entry registration and transfer system, the number of Notes represented by such Global Notes to the accounts of Participants designated by the Underwriters. Ownership of beneficial interest in such Global Notes will be limited to Participants or Indirect Participants. Each Global Note shall bear such legend as may be required or reasonably requested by the Depositary. Notes in definitive form, substantially in the form set forth in Exhibit B (the "CERTIFICATED NOTES"), shall be issuable only in fully registered form without coupons and only in denominations of $1,000 in principal amount and any integral multiple thereof. The Certificated Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Notes may be listed, all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.02. EXECUTION AND AUTHENTICATION. Subject to Article Four, the aggregate principal amount of securities which may be authenticated and delivered under this Indenture is unlimited. Two Officers shall execute the Notes for the Company by facsimile or manual signature in the name and on behalf of the Company. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee or authenticating agent authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on the Note. Such signature shall be conclusive evidence that the Note has been authenticated under this Indenture. Pursuant to and based upon a Company Order, the Trustee or an authenticating agent shall authenticate for original issue Notes registered in the name of the Depositary or the nominee of the Depositary or other Person, as specified in the Company Order, and shall deliver such Global Notes to the Depositary or pursuant to the Depositary's instructions or to such other Person; provided that the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in connection with such authentication and delivery of the Notes. Such Company Order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and shall specify the aggregate principal amount of Notes then authorized. The Trustee may appoint an authenticating agent to authenticate Notes. If the appointment of such authenticating agent is not at the discretion and for the convenience of the Trustee, then such authenticating agent shall be compensated by the Company. An authenticating agent may authenticate Notes whenever the Trustee may do so, except with regard to the original issuance of the Notes. Except as provided in the preceding sentence, each reference in this Indenture to authentication by the Trustee includes authentication by such authenticating agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. The provisions of Sections 7.01, 7.02 and 7.07 hereof shall be applicable to any authenticating agent. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Certificated Notes may be presented for registration of transfer or for exchange (the "REGISTRAR"), an office or agency where Notes may be presented for payment (the "PAYING AGENT"), and an office or agency where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served, in each case, located in the Borough of Manhattan, The City of New York, State of New York. The Registrar shall keep a register containing the names and addresses of all Holders (the "REGISTER") and of the transfer and exchange of Certificated Notes. Any notice to be given under this Indenture or under the Notes by the Trustee or the Company to Holders shall be mailed by first class mail to each Holder at its address as it appears at the time of such mailing in the Register. The Company may have one or more co-Registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. Except as otherwise provided herein, the Company or any Subsidiary thereof may act as Paying Agent. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may 17 from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.07. The Company initially appoints the Corporate Trust Office of the Trustee in the Borough of Manhattan located at the address set forth in Section 11.02 as Registrar. Paying Agent and agent for service of notices and demands in connection with the Notes and this Indenture. SECTION 2.04. HOLDERS TO BE TREATED AS OWNERS; PAYMENTS. (a) The Company, the Paying Agent, the Registrar, the Trustee and any agent of the Company, the Paying Agent, the Registrar or the Trustee may deem and treat each Holder of a Note as the absolute owner of such Note for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, and interest on such Note and for all other purposes. Neither the Company, the Paying Agent, the Registrar, the Trustee nor any agent of the Company, the Paying Agent, the Registrar or the Trustee shall be affected by any notice to the contrary. All such payments so made to any such Person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any Note. So long as the Depositary is the registered holder of any Global Note, the Participants and Indirect Participants shall have no rights under this Indenture or under any Global Note with respect to such Global Note held on their behalf by the Depositary, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the sole owner and holder of such Notes represented by such Global Note for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on the Global Notes and for all other purposes. Notwithstanding the foregoing, nothing herein shall impair the operation of customary practices of the Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. No beneficial owner of an interest in any Global Note shall be able to transfer such interest except in accordance with the Applicable Procedures. (b) The Holder of a Certificated Note at the close of business on the Regular Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date notwithstanding any transfer or exchange of such Certificated Note subsequent to the Regular Record Date and prior to such Interest Payment Date, except if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, in which case such defaulted interest shall be paid in accordance with Section 2.13; provided that, in the event of an exchange of a Certificated Note for a beneficial interest in any Global Note subsequent to a Regular Record Date or any special record date and prior to or on the related Interest Payment Date, any payment of interest payable on such payment date with respect to any such Certificated Note shall be made to the Person in whose name such Certificated Note was registered on such record date. (c) Principal of, premium, if any, and interest on the Certificated Notes shall be payable at the office of the Paying Agent; provided that, at the option of the Company, payment of interest may be made by check mailed to the address of the Holder as such address appears in the Register on the relevant record date. Any payment of principal or interest due on the Global Notes on any Interest Payment Date or at maturity will be made available by the Company to the Trustee by such date in accordance with Section 2.15. As soon as possible thereafter, such Trustee will make such payments to the Depositary or its nominee, as the case may be, as the registered owner of the Global Notes representing such Notes in accordance with existing arrangements between the Trustee and the Depositary. None of the Underwriters, the Company, the Trustees, or any payment agent for the Global Notes will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership 18 interests in any of the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent will hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. Unless the Company, any Subsidiary or any Affiliate of any of them is the Paying Agent, money held in trust by the Paying Agent need not be segregated except as required by law and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder. The Company at any time may require the Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Event of Default specified in Section 6.01(a) or (b), upon written request to the Paying Agent, require such Paying Agent to pay forthwith all money so held by it to the Trustee and to account for any funds disbursed. Upon making such payment, the Paying Agent shall have no further liability for the money delivered to the Trustee. If the Company or any Subsidiary of the Company acts as Paying Agent it shall, on or before each due date of the principal of or interest on the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. SECTION 2.06. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it from the Registrar of the names and addresses of the Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least five Business Days before each Interest Payment Date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders, if any. Ownership of beneficial interest in Global Notes will be shown on, and the transfer of that ownership will be effective only through, records maintained by the Depositary for such Global Notes or by Participants or Indirect Participants. None of the Underwriters, the Company, the Trustees, or any Paying Agent for the Global Notes will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in any of the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. SECTION 2.07. TRANSFER AND EXCHANGE. When Notes are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charge payable upon exchanges pursuant to Section 2.11, 3.07 or 9.04). The Registrar shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Notes selected for redemption under Section 3.03 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. Except as set forth in this Section 2.07, the Global Notes may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by the nominee of the Depositary to the Depositary or another nominee of the Depositary or by the nominee of the Depositary or by the Depositary of any such nominee to a successor of the Depositary or a nominee of each successor. Global Notes shall be 19 exchangeable for corresponding Certificated Securities registered in the name of persons other than the Depositary if (A) the Depositary (i) notifies the Company that it is unwilling or unable to continue to act as Depositary for any of the Global Notes or (ii) at any time ceases to be a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; (B) there shall have occurred and be continuing an Event of Default with respect to the Notes; or (C) the Company delivers to the Trustee a Company Order that the Global Notes shall be so exchangeable. Any Certified Notes so issued shall be registered in such names and in such denominations as the Depositary shall request. Upon the exchange of a Global Note for Certificated Notes without coupons, in authorized denominations, such Global Note shall be cancelled by the Trustee. Certificated Notes issued in exchange for a Global Note pursuant to this Section 2.07 shall be registered in such names and in such authorized denominations as the Depositary for such Global Note, pursuant to instructions from its Direct or Indirect Participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Notes to or as directed by the Persons in whose names such Notes are so registered. All Notes issued upon any transfer or exchange of Notes shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such transfer or exchange. SECTION 2.08. REPLACEMENT NOTES. If a mutilated Certificated Note is surrendered to the Registrar or the Trustee, if a mutilated Global Note is surrendered to the Company or the Trustee or if the Company and the Trustee receive evidence to their satisfaction that any Note has been lost, destroyed or stolen, the Company shall issue and the Trustee shall authenticate a replacement Note in such form as the Notes mutilated, lost, destroyed or wrongfully taken if (i) in the case of a lost, destroyed or stolen Note, the Holder of such Note furnishes to the Company, the Trustee and, in the case of a Certificated Note, the Registrar, evidence reasonably acceptable to them of the ownership and the destruction, loss or theft of such Note and (ii) an indemnity bond shall be posted by the Holder requesting replacement, sufficient in the judgment of each to protect the Company, the Registrar (in the case of a Certificated Note ), the Trustee or any Agent from any loss that any of them may suffer if such Note is replaced. Prior to the issuance of any such replacement Note, the Trustee shall notify the Company of any request therefor. The Company may charge such Holder for the Company's out-of-pocket expenses in replacing such Note and the Trustee may charge the Holder for the Trustee's expenses in replacing such Note. Every replacement Note shall constitute an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionally with all other Notes issued hereunder. The provisions of this Section 2.08 are exclusive and shall preclude (to the extent permitted by applicable law) all other rights and remedies against the Company and the Trustee with respect to the replacement of mutilated, lost, destroyed or stolen Notes. SECTION 2.09. OUTSTANDING NOTES. The Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for (a) those cancelled by it, (b) those delivered to it for cancellation, (c) to the extent set forth in Sections 8.01 and 8.02, on or after the date on which the conditions set forth in Section 8.01 or 8.02 have been satisfied, those Notes theretofore authenticated and delivered by the Trustee hereunder and (d) those described in this Section 2.09 as not outstanding. Subject to Section 2.10, a Note does not cease to be outstanding because the Company or one of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.08, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser in whose hands such Note is a legal, valid and binding obligation of the Company. If the principal amount of any Note is considered to be paid under Section 4.01, it ceases to be outstanding and interest thereon shall cease to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of the Company), in its capacity as such, holds on the Stated Maturity of a Note, on any Redemption Date or on any Payment 20 Date, money sufficient to pay all accrued interest and principal with respect to such Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. SECTION 2.10. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent or any amendment, modification or other change to this Indenture, Notes owned by the Company, any Subsidiary of the Company, or an Affiliate of the Company shall be disregarded as though they were not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent or any amendment, modification or other change to this Indenture, only Notes that the Trustee actually knows are so owned shall be so disregarded. SECTION 2.11. TEMPORARY NOTES. Until Certificated Notes are prepared and ready for delivery, the Company may prepare and the Trustee shall, upon receipt of a Company Order, authenticate temporary Notes. Temporary Notes shall be substantially in the form of Certificated Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Certificated Notes in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as Certificated Notes. SECTION 2.12. CANCELLATION. All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Company has not issued sold, and all Notes so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire any of the Notes, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 2.12, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures and certification of their disposal delivered to the Company unless by Company Order the Company shall direct that cancelled Notes be returned to it. SECTION 2.13. DEFAULTED INTEREST. If the Company defaults on a payment of interest on the Notes, it shall pay the defaulted interest plus (to the extent permitted by law) any interest payable on the defaulted interest in accordance with the terms hereof, to (a) the Persons who are Holders of Certificated Notes, if any, on a subsequent special record date, which date shall be at least five Business Days prior to the payment date for such defaulted interest, and (b) if any Global Notes are outstanding on such payment date, to the Holder of the Global Notes on such payment date. The Company shall fix such special record date and payment date in a manner reasonably satisfactory to the Trustee. At least 15 days before such special record date, the Company shall mail to the Trustee, each Holder of Certificated Notes, if any, and if the Global Notes are still outstanding, to the Holder thereof and the Depositary, a notice that states the special record date, the payment date and the amount of defaulted interest and interest payable on such defaulted interest to be paid. SECTION 2.14. CUSIP, CINS OR ISIN NUMBER. The Company in issuing the Notes may use a "CUSIP," "CINS" or "ISIN" number, and if so, such CUSIP, CINS or ISIN number shall be included in notices of redemption, repurchase or exchange as a convenience to Holders, provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP, CINS or ISIN number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes; and provided further that failure to use CUSIP, CINS or ISIN numbers in any notice of redemption, repurchase or exchange shall not affect the validity or 21 sufficiency of such notice. The Company will promptly notify the Trustee of any change in the CUSIP, CINS or ISIN number. SECTION 2.15. DEPOSIT OF MONEYS. Prior to 12:00 noon, New York City time, on each Interest Payment Date, at the Stated Maturity of the Notes, on each Redemption Date, on each Payment Date and on the Business Day immediately following any acceleration of the Notes pursuant to Section 6.02, the Company shall deposit with the Paying Agent in immediately available funds, money (in United States dollars) sufficient to make cash payments, if any, due on such Interest Payment Date, Stated Maturity, Redemption Date, Payment Date or Business Day, as the case may be, in a timely manner which permits the Trustee to remit payment to the Holders on such Interest Payment Date, Stated Maturity, Redemption Date, Payment Date or Business Day, as the case may be. SECTION 2.16. ISSUANCE OF ADDITIONAL NOTES. The Company may, subject to Article Four of this Indenture, issue additional Notes under this Indenture. The Notes offered hereby and any additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. ARTICLE THREE REDEMPTION SECTION 3.01. RIGHT OF REDEMPTION. (a) The Notes will be redeemable at the Company's option, in whole or in part, at any time or from time to time prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's last address as it appears in the Security Register, at a Redemption Price equal to (i) the principal amount of the new notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date, plus (iii) the Make Whole Premium. (b) The Notes will also be redeemable, at the Company's option, in whole or in part, at any time or from time to time prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each holders' last address as it appears in the Security Register, in an aggregate principal amount not to exceed $100 million, at a redemption price equal to (i) 101% of the principal amount of the Notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date. Any such redemption shall be payable only out of Excess Cash Flow. The aggregate cumulative amount of any such redemption(s) shall be called the "EXCESS CASH FLOW REDEMPTION PAYMENTS." SECTION 3.02. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to Section 3.01, it shall notify the Trustee in writing of (i) the clause of the Indenture pursuant to which the redemption shall occur, (ii) the Redemption Date, (iii) the principal amount at Stated Maturity of Notes to be redeemed plus interest accrued thereon, if any, to the Redemption Date and (iv) the Redemption Price. The Company shall give each notice provided for in this Section 3.02 in an Officers' Certificate at least 15 days before mailing the notice to Holders referred to in Section 3.01. SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate; provided that no Note of $1,000 in principal amount or less shall be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. SECTION 3.04. NOTICE OF REDEMPTION. With respect to any redemption of Notes pursuant to Section 3.01, at least 30 days but not more than 60 days before a Redemption Date, the Company shall 22 mail a notice of redemption by first class mail to each Holder whose Notes are to be redeemed at such Holder's registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price; (c) the name and address of the Paying Agent; (d) that Notes called for redemption must be surrendered to the Paying Agent in order to collect the Redemption Price; (e) the paragraph of the Notes and/or the Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; (f) that, unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Notes to the Paying Agent; (g) that, if any Note is being redeemed in part, the portion of the principal amount (equal to $1,000 in principal amount or any integral multiple thereof) of such Note to be redeemed and that, on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be reissued; (h) that, if any Note contains a CUSIP, CINS, ISIN or other identification number as provided in Section 2.14, no representation is being made as to the correctness of the CUSIP, CINS, ISIN or other identification number either as printed on the Notes or as contained in the notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes; and (i) the aggregate principal amount at Stated Maturity of Notes being redeemed. At the Company's request contained in a Company Order (which request may be revoked by the Company at any time prior to the time at which the Trustee shall have given such notice to the Holders), made to the Trustee at least 15 days before mailing the notice to Holders refined to in Section 3.01, the Trustee shall give such notice of redemption in the name and at the expense of the Company. If, however, the Company gives such notice to the Holders, the Company shall concurrently deliver to the Trustee an Officers' Certificate stating that such notice has been given. Notice of redemption shall be denied to be given when mailed, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of Notes held by Holders to whom such notice was properly given. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, the Company shall deposit with the Paying Agent (or, if the Company is acting as its own Paying Agent, shall segregate and hold in trust as provided in Section 2.05), in accordance with Section 2.15, money sufficient to pay the Redemption Price of, and accrued and unpaid interest on all Notes to be redeemed on that date other than Notes or portions thereof called for redemption on that date that have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of redemption has been given to Holders in the manner provided above, the Notes or portion of Notes specified in such notice to be redeemed shall become irrevocably due and payable on the Redemption Date at the Redemption Price stated therein, together with accrued interest to such Redemption Date, and on and after any such Redemption Date (unless the Company shall default in the payment of Notes to be redeemed on such date at the Redemption Price, plus accrued interest to the Redemption Date, in which case the principal, until paid, shall bear interest from the Redemption Date at the rate prescribed in the Notes), such Notes shall cease to accrue interest. Upon surrender of any Note for redemption in accordance with a notice of 23 redemption, such Note shall be paid and redeemed by the Company at the Redemption Price, plus accrued interest to the Redemption Date, provided that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders registered as such at the close of business on the relevant Regular Record Date. SECTION 3.07. NOTES REDEEMED IN PART. Upon cancellation of any Note that is redeemed in part, the Company shall, at its expense, issue and the Trustee shall authenticate and deliver to the Holder a new Note equal in principal amount to the unredeemed portion of such surrendered Note. ARTICLE FOUR COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company, or any Affiliate of any of them) holds as of 10:00 A.M. New York City time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay the installment. SECTION 4.02. ISSUANCES OF GUARANTEES BY NEW RESTRICTED SUBSIDIARIES. The Company will provide to the Trustee, on the date that any Person becomes a Restricted Subsidiary, a supplemental indenture to this Indenture, executed by such new Restricted Subsidiary, providing for a full and unconditional guarantee on a senior basis by such new Restricted Subsidiary of the Company's obligations under the Notes and this Indenture; provided that, in the case of any new Restricted Subsidiary that becomes a Restricted Subsidiary through the acquisition of a majority of its voting Capital Stock by the Company or any other Restricted Subsidiary, such guarantee may be subordinated to the extent required by the obligations of such new Restricted Subsidiary existing on the date of such acquisition that were not incurred in contemplation of such acquisition. A Subsidiary Guarantor shall be released from its Subsidiary Guaranty in the event all the Capital Stock of such Subsidiary Guarantor is sold in compliance with the provisions of this Indenture to a person other than the Company or any of its Restricted Subsidiaries. SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than the Notes, the Subsidiary Guarantees and Indebtedness existing on the Closing Date, including the Existing Notes not exchanged for Notes, the Subordinated Intercompany Note and the Subordinated Subsidiary Guarantor Guaranties); provided that the Company may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Consolidated Leverage Ratio would be greater than zero and less than 5 to 1. Notwithstanding the foregoing, the Company and any Restricted Subsidiary (except as specified below) may Incur each and all of the following: (i) Indebtedness outstanding at any time that is Incurred to finance the purchase or construction of (and related launch, insurance, and other costs with respect to) the Replacement Satellite; provided, however, that the amount of any such Indebtedness shall not exceed (x) $100,000,000 plus (y) the aggregate amount of all Excess Cash Flow Redemption Payments actually made as of such date plus (z) the amount of any Designated Equity Proceeds: except to the extent such amount of Designated Equity Proceeds is used as a basis to Incur Indebtedness pursuant to clause (viii) of this paragraph (a), to make Investments or to make Restricted Payments; provided further, that any such Indebtedness shall be Incurred contemporaneously with the purchase of the Replacement Satellite or within sixty (60) days thereafter (or Incurred to refinance, renew or replace such Indebtedness); and provided further, that if such Indebtedness is Incurred to finance the construction of the Replacement Satellite, any such Indebtedness shall be Incurred within 60 days after the completion of construction of such Replacement Satellite; 24 (ii) Indebtedness owed (A) to the Company or (B) to any of its Restricted Subsidiaries; provided that any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness, other than Indebtedness Incurred under clause (ii), (iv), (vi) or (viii) of this paragraph, and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to refinance or refund the Notes, the Subsidiary Guaranties or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes shall only be permitted under this clause (iii) if (A) in case the Notes or the Subsidiary Guaranties are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or the Subsidiary Guaranties, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or the Subsidiary Guaranties, as the case may be, (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or the Subsidiary Guaranties, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or the Subsidiary Guaranties at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or the Subsidiary Guaranties, as the case may be, and (C) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; (iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided that such agreements (a) are designed solely to protect the Company or its Subsidiaries against fluctuations in foreign currency exchange rates or interest rates and (b) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary of the Company (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary of the Company for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; (v) Indebtedness of the Company, to the extent the net proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the Notes as described in Section 8.02 of this Indenture; (vi) Guarantees of the Notes and Guarantees of Indebtedness of the Company by any Restricted Subsidiary provided the Guaranty of such Indebtedness is permitted by and made in accordance with Section 4.02; (vii) Indebtedness not to exceed $5,000,000 at any time outstanding Incurred to finance the cost (including the cost of design, development, construction, installation, improvement, transportation or integration) of equipment (other than satellites) or inventory acquired by the Company or a Restricted Subsidiary after the Closing Date; 25 (viii) Indebtedness of the Company not to exceed, at any one time outstanding, the Net Cash Proceeds received by the Company after the Closing Date from Designated Equity Proceeds, except to the extent such amount of Designated Equity Proceeds is used to Incur Indebtedness pursuant to clause (i) of this paragraph, to make Investments or to make Restricted Payments; provided that such Indebtedness does not mature prior to the Stated Maturity of the Notes and has an Average Life longer than the Notes; and (ix) indemnification obligations by the Company and its Restricted Subsidiaries in favor of former Subsidiaries ("Transferred Subsidiaries") of the Company transferred pursuant to the Data Business Transfer against amounts (including guarantee payments) paid or expenses incurred by such Transferred Subsidiaries under their Guarantees of the Existing Notes. (b) For purposes of determining any particular amount of Indebtedness under this Section 4.03, Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included. For purposes of determining compliance with this Section 4.03, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, the Company, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. (c) In the event that the Company or any Restricted Subsidiary shall repay any Indebtedness (other than the Notes) pursuant to clause (i)(A) of Section 4.11 of this Indenture, the aggregate amount of Indebtedness which may otherwise be Incurred under clause (viii) of paragraph (a) of this Section 4.03 shall be reduced by the amount of such repayment. The Company shall designate how much of such reduction shall be applied to each such clause. (d) Notwithstanding any other provision of this Section 4.03, (i) the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded due solely to fluctuations in the exchange rates of currencies and (ii) the Company and each Subsidiary Guarantor may not incur any Indebtedness other than Acquired Indebtedness that is expressly subordinated to any other Indebtedness of the Company or such Subsidiary Guarantor, as the case may be, unless such Indebtedness, by its terms or the terms of any agreement or instrument pursuant to which such Indebtedness is outstanding, is also expressly made subordinate to the Notes or the Note Guarantee of such Subsidiary Guarantor, as the case may be, at least to the extent that such Indebtedness is subordinated to such other Indebtedness; provided that the limitation in this clause (ii) shall not apply to distinctions between categories of unsubordinated Indebtedness which exist by reason of (a) any liens or other encumbrances arising or created in respect of some but not all unsubordinated Indebtedness, (b) intercreditor agreements between holders of different classes of unsubordinated Indebtedness or (c) different maturities or prepayment provisions. SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution on or with respect to its Capital Stock (other than (x) dividends or distributions payable solely in shares of its Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock and (y) pro rata dividends or distributions on Common Stock of Restricted Subsidiaries held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiaries' net income from the first day of the fiscal quarter beginning immediately following the Closing Date) held by Persons other than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company, any Subsidiary Guarantor or an Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by Persons other than the Company and its Wholly Owned Subsidiaries, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness of the Company that is subordinated in right of payment to the Notes or of any Subsidiary Guarantor that is subordinated to the Subsidiary Guaranties (other than, in each case, the 26 purchase, repurchase or the acquisition of Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in any case due within one year of the date of acquisition) or (iv) make any Investment, other than a Permitted Investment, in any Person (such payments or any other actions described in clauses (i) through (iv) being collectively "RESTRICTED PAYMENTS") if, at the time of, and after giving effect to, the proposed Restricted Payment: (A) an Event of Default shall have occurred and be continuing, (B) except with respect to Investments in Restricted Subsidiaries and dividends on the Common Stock of any Subsidiary Guarantor paid to the Company or any Restricted Subsidiary, the Company could not Incur at least $1.00 of Indebtedness under the first sentence of paragraph (a) of Section 4.03 or (C) the aggregate amount of all Restricted Payments (the amount, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) made after the Closing Date (after giving pro forma effect to the proposed Restricted Payment) shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) (determined by excluding income resulting from transfers of assets by the Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter immediately following the Closing Date and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed pursuant to Section 4.18 plus (2) the aggregate amount of Designated Equity Proceeds received by the Company after the Closing Date, except to the extent such amount of Designated Equity Proceeds is used as a basis to Incur Indebtedness pursuant to clause (i) or (viii) of paragraph (a) under Section 4.03, plus (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Adjusted Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed, in each case, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. (b) The foregoing provision shall not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration thereof if, at such date of declaration, such payment would comply with the foregoing paragraph (a); (ii) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Notes including premium, if any, and accrued and unpaid interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of paragraph (a) of Section 4.03; (iii) the repurchase, redemption or other acquisition of Capital Stock of the Company (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock (other than Disqualified Stock) of the Company; (iv) [intentionally omitted]; (v) payments or distributions, to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the Article Five; (vi) [intentionally omitted]; and (vii) Investments to the extent the amount invested consists solely of an amount of Designated Equity Proceeds received within six months of the Investment, except to the extent such amount of Designated Equity Proceeds was used as a basis to Incur Indebtedness pursuant to clause (i) or (viii) of paragraph (a) of Section 4.03 or to make other Restricted Payments. 27 provided that, except in the case of clauses (i) and (iii), no Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein. Each Restricted Payment permitted pursuant to the preceding paragraph (other than the Restricted Payment referred to in clause (ii) thereof and an exchange of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) thereof) and the Net Cash Proceeds from any issuance of Capital Stock referred to in clause (iii)) shall be included in calculating whether the conditions of clause (C) of the first paragraph of this Section 4.04 have been met with respect to any subsequent Restricted Payments. Any Restricted Payments made other than in cash shall be valued at fair market value. The amount of any Investment "outstanding" at any time shall be deemed to be equal to the amount of such Investment on the date made, less the return of capital to the Company and its Restricted Subsidiaries with respect to such Investment (up to the amount of such Investment on the date made). SECTION 4.05. [Intentionally omitted]. SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except: (i) to the Company or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law; (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary, provided any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 4.04, if made on the date of such issuance or sale; and (iv) issuances or sales of Common Stock of any Restricted Subsidiary, the Net Cash Proceeds of which are promptly applied pursuant to clause (i)(A) or (i)(B) of the second paragraph of Section 4.10 of this Indenture; provided that at no time may a Restricted Subsidiary, the Common Stock of which his been issued or sold pursuant to this clause (iv), be the owner of a satellite. SECTION 4.07. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or with any Affiliate of the Company or any Restricted Subsidiary, except upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than could be obtained, at the time of such transaction or, if such transaction is pursuant to a written agreement, at the time of the execution of the agreement providing therefor, in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to (i) transactions (A) approved by a majority of the disinterested members of the Board of Directors or (B) for which the Company or a Restricted Subsidiary delivers to the Trustee a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view, (ii) any transaction solely between the Company and any of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries, (iii) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company, (iv) any payments or other transactions pursuant to any tax-sharing agreement between the Company and any other Person with which the Company files a consolidated tax return or with which the Company is part of a consolidated group for tax purposes, (v) any Restricted Payments not prohibited by Section 4.04, (vi) Kingston's and Matra's rights to commissions and other payments under sales representation or ground operation agreements, Matra's rights to payments, including without limitation 28 incentive payments, under the Telstar 11 Satellite Contract and Telstar 12 Satellite Contract, and Kingston's rights to payments for services under network monitoring contracts, in each case as in effect on the Closing Date and with such extensions, amendments and renewals that may be entered into on terms at least as favorable to the Company or its Restricted Subsidiaries, as the case may be, as the terms of agreements in effect on the Closing Date, or (vii) the Data Business Transfer or the issuance of the Subordinated Intercompany Note. Notwithstanding the foregoing, any transaction covered by the first paragraph of this Section 4.07 and not covered by clauses (ii) through (vii) of this paragraph, the aggregate amount of which exceeds $5 million in value, must be approved or determined to be fair in the manner provided for in clause (i)(A) or (B) above. SECTION 4.08. LIMITATION ON LIENS. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on any of its assets or properties of any character, or any shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without making effective provision for all of the Notes and all other amounts due under the Indenture to be directly secured equally and ratably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the obligation or liability secured by such Lien. The foregoing limitation does not apply to the following: (i) Liens existing on the Closing Date provided that such Liens shall secure only those obligations which they secure on the Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital Stock of the Company or its Restricted Subsidiaries created in favor of the Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the Company or such other Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (iii) of paragraph (a) of Section 4.03 of this Indenture; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced; or (v) Permitted Liens. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on Telstar 11, Telstar 12 or Telstar 10 (or any replacement satellite therefor) that secures Indebtedness, other than pursuant to clauses (vi) or (xxi) of the definition of Permitted Liens. SECTION 4.09. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any sale-leaseback transaction involving any of its assets or properties whether now owned or hereafter acquired, whereby the Company or a Restricted Subsidiary sells or transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which the Company or such Restricted Subsidiary, as the case may be, intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred. The foregoing restriction does not apply to any sale-leaseback transaction if (i) the lease is for a period, including renewal rights, of not in excess of three years; (ii) the lease constitutes Indebtedness and secures or relates to industrial revenue or pollution control bonds; (iii) the transaction is solely between the Company and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12 months after the sale or transfer of any assets or properties is completed, applies an amount not less than the net proceeds received from such sale or transfer in accordance with clause (i)(A) or (i)(B) of the second paragraph of Section 4.10 of this Indenture. 29 SECTION 4.10. LIMITATION ON ASSET SALES. The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale unless (i) such sale is on an arms-length basis and the consideration received by the Company or such Restricted Subsidiary (including the amount of any Released Indebtedness) is at least equal to the fair market value of the assets sold or disposed of, as determined (a) by the Board of Directors of the seller thereof or (b) if the purchase price for such Asset Sale equals or exceeds $10,000,000, a fairness opinion by a nationally recognized appraisal, accounting or investment banking firm addressed to the Company and delivered by the Company to the Trustee, and (ii) at least 85% of the consideration received (excluding the amount of any Released Indebtedness) consists of cash or Temporary Cash Investments or any property or assets that are referred to in clause (B) of the next paragraph. In the event and to the extent that the Net Cash Proceeds received by the Company or any of its Restricted Subsidiaries from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of the Company and its subsidiaries has been filed pursuant to Section 4.18, then the Company shall or shall cause the relevant Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the Company or any Restricted Subsidiary owing to a Person other than the Company or any of its Restricted Subsidiaries or (B) invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement), in property or assets (other than current assets) of a nature or type or that are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, the Company and its Restricted Subsidiaries existing on the date of such investment and (ii) apply (no later than the end of the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraph of this Section 4.10. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in clause (i) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this Section 4.10 totals at least $10 million, the Company must commence, not later than the 15th Business Day of such month, and consummate an Offer to Purchase from the Holders on a pro rata basis an aggregate principal amount Notes equal to the Excess Proceeds on such date, at a purchase price equal to 101% of the outstanding principal amount of the Notes, plus accrued interest (if any) to the Payment Date. SECTION 4.11. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain an office or agency where the Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company, in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Corporate Trust Office of the Trustee as such office of the Company in accordance with Section 2.03. 30 SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. The Company shall commence, within 30 days of the occurrence of a Change of Control, and consummate an Offer to Purchase for all Notes then outstanding, at a purchase price equal to 101% of the outstanding principal amount of the Notes, plus accrued interest (if any) to the Payment Date. SECTION 4.13. EXISTENCE. Subject to Articles Four and Five of this Indenture, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence of each Restricted Subsidiary in accordance with the respective organizational documents of the Company and each such Restricted Subsidiary and the rights (whether pursuant to charter, partnership certificate, agreement, statute or otherwise), licenses and franchises of the Company and each such Restricted Subsidiary, provided that the Company shall not be required to preserve any such right, license or franchise, or the existence of any Restricted Subsidiary (other than of the Company), if the maintenance or preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole; and provided further that any Restricted Subsidiary may consolidate with, merge into, or sell, convey transfer, lease or otherwise dispose of all or part of its property and assets to the Company or any Wholly Owned Restricted Subsidiary. SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge and shall cause each Restricted Subsidiary to pay or discharge, or cause to be paid or discharged, before the same shall become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon (a) the Company or any such Restricted Subsidiary, (b) the income or profits of any such Restricted Subsidiary which is a corporation or (c) the property of the Company or any such Restricted Subsidiary and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any such Restricted Subsidiary, providedthat the Company shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings or by the Company and its Restricted Subsidiaries where the failure to effect such payment is not adverse in any material respect to the Holders. SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE. The Company shall maintain (a) in-orbit insurance with respect to Telstar 11, Telstar 12 and Telstar 10 in an amount at least equal to the cost to replace such satellite with a satellite of comparable or superior technological capability (as estimated by the Board of Directors) and having at least as much transmission capacity as such satellite, and (b) with respect to each other satellite to be launched by the Company or any Restricted Subsidiary and each replacement satellite therefor, (i) launch insurance with respect to each such satellite covering the period from the launch of such satellite to 180 days following such launch in an amount equal to or greater than the sum of (A) the cost to replace such satellite pursuant to the contract pursuant to which a replacement satellite will be constructed, (B) the cost to launch a replacement satellite pursuant to the contract pursuant to which a replacement satellite will be launched and (C) the cost of launch insurance for such satellite or, in the event that the Company has reason to believe that the cost of obtaining comparable insurance for a replacement satellite would be materially higher, the Company's best estimate of the cost of such comparable insurance and (ii) at all times subsequent to 180 days after the launch (if it is a Successful Launch) of each such satellite, in-orbit insurance in an amount at least equal to the cost to replace such satellite with a satellite of comparable or superior technological capability (as estimated by the Board of Directors) and having at least as much transmission capacity as such satellite was designed to have. The in-orbit insurance required by this Section 4.15 shall provide that, if 50% or more of a satellite's initial capacity is lost, the full amount of insurance will become due and payable, and that, if a satellite is able to maintain more than 50% but less than 90% of its initial capacity, a pro rata portion of such insurance will become due and payable. The insurance required by this Section 4.15 shall name the Company and/or any Subsidiary Guarantor as the sole loss payee or payees, as the case may be, thereof. In the event that the Company (or a Subsidiary Guarantor) receives proceeds from insurance relating to any satellite, the Company (or a Subsidiary Guarantor) may use a portion of such proceeds to repay any vendor or third-party purchase money financing pertaining to such satellite (other than Telstar 11) that is required to be repaid by reason of the loss giving rise to such insurance proceeds. The Company (or 31 a Subsidiary Guarantor) may use the remainder of such proceeds to develop, construct, launch and insure a replacement satellite (including components for a related ground spare) if (i) such replacement satellite is of comparable or superior technological capability as compared with the satellite being replaced and has at least as much transmission capacity as the satellite being replaced and (ii) the Company will have sufficient funds to service the Company's projected debt service requirements until the scheduled launch of such replacement satellite and for one year thereafter and to develop, construct, launch and insure (in the amounts required by the preceding paragraph) such replacement satellite, provided that such replacement satellite is scheduled to be launched within 26 months of the receipt of such proceeds. Any such proceeds not used as permitted by this Section 4.15 shall be applied, within 90 days, to reduce Indebtedness of the Company or shall constitute "Excess Proceeds" for purposes of Section 4.10. The Company shall further provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds considered reasonable by the Company in the conduct of its business. The Company shall cause all properties owned by the Company or any Subsidiary or used or held for use in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.15 shall prevent the Company from discontinuing the maintenance of any of such properties if such discontinuance is not disadvantageous in any material respect to the Holders. SECTION 4.16. COMPLIANCE CERTIFICATES. Both of the two principal accounting officers of the Company and each Subsidiary Guarantor shall certify, on or before a date not more than 90 days after the end of each fiscal year of the Company, that a review has been conducted of the activities of the Company and its Restricted Subsidiaries or such Subsidiary Guarantor, as the case may be, and the Company's and its Restricted Subsidiaries' or such Subsidiary Guarantor's, as the case may be, performance under the Indenture and that the Company and each Subsidiary Guarantor have fulfilled all obligations thereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. The Company shall also notify the Trustee of any default or defaults in the performance of any covenants or agreements under the Indenture. The Company shall also comply with the other provisions of Section 314(a) of the TIA. SECTION 4.17. NOTICE OF DEFAULTS. In the event that the Company or any Subsidiary Guarantor becomes aware of any Event of Default, the Company or such Subsidiary Guarantor, as the case may be, promptly after it becomes aware thereof, will deliver to the Trustee an Officer's Certificate specifying such Event of Default and what actions the Company or such Subsidiary Guarantor, as the case may be, is taking or proposes to take with respect thereto. SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS. Whether or not the Company is required to file reports with the Commission, the Company shall file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company shall, at the Company's expense, supply the Trustee and each Holder, or shall supply to the Trustees for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information. SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture, and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the 32 Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.20. REPLACEMENT SATELLITE. Prior to the purchase or construction of the Replacement Satellite, the Company shall provide to the Trustee a written opinion from an independent party qualified in making such determination that the purchase price or construction cost, as the case may be, of the Replacement Satellite is consistent with then prevailing market prices for comparable satellites. SECTION 4.21. RATING. The Company shall use its best efforts from the Closing Date to obtain a rating from Moody's or, if no such rating can be so obtained from Moody's, S&P, with respect to the Notes. SECTION 4.22. BUSINESS ACTIVITIES. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in (i) any business other than any of the lines of business conducted by it or by such Restricted Subsidiaries on the Closing Date, including the ownership and operation of geosynchronous satellites through which the Company and the Restricted Subsidiaries provide fixed satellite services such as video distribution and other satellite transmission services such as transmission capacity for cable and television programmers, news and information networks, telecommunications companies, internet services providers and other carriers for a variety of applications, and (ii) any business reasonably related thereto. SECTION 4.23. PAYMENTS FOR CONSENT. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Loral Space Guaranty or the Notes unless such consideration is offered to be paid and is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. MERGER, CONSOLIDATION, AND SALE OF ASSETS. Each of the Company and each Subsidiary Guarantor will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in a series of related actions) to, any Person or permit any Person to merge with or into the Company or any Subsidiary Guarantor unless: (i) the Company or any Subsidiary Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or Subsidiary Guarantor) formed by such consolidation or into which the Company or any Subsidiary Guarantor, as the case may be, is merged or that acquired or leased such property and assets of the Company or any Subsidiary Guarantor, as the case may be, shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustees, all of the obligations of the Company or any Subsidiary Guarantor, as the case may be, on all of the Notes and under the Indenture; (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (iii) if such transaction involves the Company or any Significant Subsidiary thereof, immediately after giving effect to such action on a pro forma basis, the Company, or any Person becoming the successor to the Company as obligor on the Notes shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction; (iv) if such transaction involves the Company or any Significant Subsidiary thereof, immediately after giving effect to such transaction on a pro forma basis, the Company, or any Person becoming the successor obligor of the Notes, as the case may be, could Incur at least $1.00 of Indebtedness under 33 the first sentence of paragraph (a) of Section 4.03; provided that this clause (iv) shall not apply to a consolidation or merger with or into a Wholly Owned Restricted Subsidiary with a positive net worth; provided that, in connection with any such merger or consolidation, no consideration (other than Common Stock in the surviving Person or the Company) shall be issued or distributed to the stockholders of the Company; and (v) the Company or Subsidiary Guarantor, as the case may be, delivers to the Trustee an Officers' Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (iii) and (iv), if applicable) and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that a conditions precedent provided for herein relating to such transaction have been complied with; provided, however, that clauses (iii) and (iv) above do not apply if, in the good faith determination of the Board of Directors of the Company, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of incorporation of the Company; and provided further that any such transaction shall not have as one of its purposes the evasion of the foregoing limitations. SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or any sale, conveyance, transfer or other disposition of all or substantially all of the property and assets of the Company or any Subsidiary Guarantor, as the case may be, in accordance with Section 5.01 of this Indenture, the successor Person formed by such consolidation or into which the Company or such Subsidiary Guarantor is merged or to which such sale, conveyance, or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Subsidiary Guarantor under this Indenture with the same effect as if such successor Person had been named as the Company or such Subsidiary Guarantor herein and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture, the Notes and its Subsidiary Guarantee. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" shall occur with respect to the Notes if: (a) the Company defaults in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) the Company defaults in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) the Company defaults in the performance of or breaches Section 5.01 of this Indenture or fails to make or consummate an Offer to Purchase in accordance with Section 4.10 or Section 4.12 of this Indenture; (d) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in this Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; (e) there occurs with respect to (A) any issue or issues of Indebtedness of the Company, any Subsidiary Guarantor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created or (B) the TT&C Financing or any refinancing thereof which is secured by substantially the same collateral, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the fixed 34 maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company, any Subsidiary Guarantor or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company, any Subsidiary Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Subsidiary Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; (h) the Company, any Subsidiary Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Subsidiary Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; (i) any Notes Guaranty shall cease to be, or shall be asserted in writing by the Company or any Guarantor not to be, in full force and effect or enforceable in accordance with their respective terms; or (j) the occurrence of an "Event of Default" described in the Loral Space Guaranty. SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 of this Indenture that occurs with respect to the Company or any Subsidiary Guarantor, as the case may be, or an Event of Default of the type described in clause 8 or 9 of the definition of Event of Default under the Loral Space Guaranty occurs with respect to Loral Space) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal amount of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal amount of, premium, if any, and accrued interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by the Company or the relevant Subsidiary Guarantor or Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (g) or (h) above occurs with respect to the Company or an Event of Default of the type described in clause 8 or 9 of the definition of Event of Default under the Loral Space Guaranty occurs with respect to Loral Space, the principal amount of, premium, if any, and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. 35 SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of Principal of, premium, if any, interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Section 9.02, at any time after a declaration of acceleration, but before a judgment or decree for the payment of the money due has been obtained by the Trustee, the Holders of at least a majority in principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. SECTION 6.05. CONTROL BY MAJORITY. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not consistent with any such direction received from Holders of such Notes. SECTION 6.06. LIMITATION ON SUITS. A Holder may not pursue any remedy with respect to this Indenture or the Notes unless: (i) the Holder gives the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. For purposes of Section 6.05 and this Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any determination of whether the Holders of the required aggregate principal amount of outstanding Notes have concurred in any request or direction of the Trustee to pursue any remedy available to the Trustee or the Holders, with respect to this Indenture or the Notes or otherwise under law. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Subject to Sections 6.04 and 9.02, notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which shall not be impaired or affected without the consent of such Holder; provided, however, that no recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person 36 of the Company or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. SECTION 6.08. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that, if (a) default is made in the payment of any installment of interest on any Note when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Note at the maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate borne by the Notes, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Notes, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor of the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims and to distribute the same. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Notes or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; 37 and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee for all amounts due under Section 7.07; Second: to Holders for amounts then due and unpaid for principal of, premium. if any, and interest, if any, on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium, if any, and interest, if any, respectively; and Third: the balance, if any, to the Person or Persons entitled thereto. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of the suit, and the court may test reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 of this Indenture, or a suit by Holders of more than 10% in principal amount of the outstanding Notes. SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, the Trustee and the Holders continue as though no such proceeding had been instituted. SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 2.08, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Six or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 6.15. PAYMENT OF MAKE WHOLE PREMIUM. In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the 38 intention of avoiding payment of the premium that it would have had to pay if it then had elected to redeem the Notes pursuant to the optional redemption provisions of this Indenture, an equivalent Make Whole Premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. ARTICLE SEVEN TRUSTEE SECTION 7.01. GENERAL. The duties and responsibilities of the Trustee shall be as provided by the TIA and as set forth herein. Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article Seven. SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA Sections 315(a) through (d): (a) except during the continuance of an Event of Default, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee and in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth and correctness of the statements and certificates or opinions furnished to it and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) in case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs; (c) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (d) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers Certificate; (e) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (g) the Trustee may rely upon any document reasonably believed by it to be genuine and to have been signed or presented by the proper person and shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; 39 (h) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (i) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and (j) before the Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel, which shall conform to Section 11.04. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to TIA Sections 310(b) and 311. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (i) makes no representation as to the validity or adequacy of this Indenture or the Notes, (ii) shall not be accountable for the Company's use or application of the proceeds from the Notes, (iii) shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and (iv) shall not be responsible for any statement of any other party contained herein or in the Notes. The Trustee shall not be charged with knowledge of any Event of Default unless (i) a Responsible Officer of the Trustee assigned to its Corporate Trustee Administration Department (or successor department or group) shall have actual knowledge thereof or (ii) the Trustee shall have received written notice thereof at its Corporate Trust office from the Company or any Holder. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 7.05. NOTICE OF DEFAULT. If any Event of Default occurs and is continuing and if the Trustee shall have received written notification or a Responsible Officer charged with the administration of this Indenture shall have obtained knowledge, the Trustee shall mail to each Holder in the manner and to the extent provided in TIA Section 313(c) notice of such Event of Default within 90 days after such knowledge, unless such Event of Default has been cured; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. To the extent required by TIA Section 313(a), within 60 days after May 15 of each year commencing with 2002 and for as long as there are Notes outstanding hereunder, the Trustee shall mail to each Holder the Trustee's brief report dated as of such date that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b) and TIA Section 313(c) and (d). A copy of such report at the time of its mailing to Holders shall be filed with the Commission, if required, and each stock exchange, if any, on which the Notes are listed. The Company shall promptly notify the Trustee if the Notes become listed on any stock exchange, and the Trustee shall comply with TIA Section 313(d). 40 SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time such reasonable compensation as shall be agreed upon in writing for its services. The reasonable compensation of the Trustee shall not be limited by any law on compensation of a trustee of an express agent. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses and advances incurred or made by the Trustee. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and each of its directors, officers and employees for, and hold each such Person harmless against, any loss or liability or expense incurred by such Person without negligence or bad faith on the Trustee's part in connection with the acceptance or administration of this Indenture and its duties under this Indenture and the Notes, including, without limitation, the costs and expenses of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under this Indenture and the Notes. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in win to pay principal of, premium, if any, and interest on particular Notes. Without prejudice to any other rights available to the Trustee under applicable law, if the Trustee incurs expenses or renders services after the occurrence of an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses and the compensation for the services will be intended to constitute expenses of administration under Title 11 of the United States Bankruptcy Code or any applicable federal or state law for the relief of debtors. The provisions of this Section 7.07 shall survive the termination of the Indenture. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign at any time by so notifying the company in writing at least 30 days prior to the date of the proposed resignation. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the consent of the Company. The Company may at any time remove the Trustee, by Company Order given at least 30 days prior to the date of the proposed removal; provided that at such date no Event of Default shall have occurred and be continuing. Except as provided in the second sentence of the preceding paragraph, if the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If the successor Trustee does not deliver its written acceptance required by the next succeeding paragraph of this Section 7.08 within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after the delivery of such written acceptance, subject to the lien provided in Section 7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, (ii) the resignation or removal of the retiring Trustee shall become effective and (iii) the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. 41 Subject to Section 6.11, if the Trustee is no longer qualified or eligible under Section 7.10, any Holder who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. The Company shall give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue indefinitely for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein. SECTION 7.10. ELIGIBILITY. This Indenture shall always have a Trustee that satisfies the requirements of TIA Section 310(a)(1) and (5). The Trustee shall have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Trustee shall be subject to TIA Section 310(b), subject to the penultimate paragraph thereof. SECTION 7.11. MONEY HELD IN TRUST. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law, and except for money held in under Article Eight of this Indenture. SECTION 7.12. WITHHOLDING TAXES. The Trustee, as agent for the Company, shall exclude and withhold from each payment of principal and interest and other amounts due hereunder or under the Notes any and all U.S. withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection herewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Notes, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Holders of the Notes, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each Holder of a Note appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Holders may reasonably request from time to time. ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise provided in this Section 8.01, each of the Company and the Guarantors may terminate its obligations under the Notes and this Indenture if: (a) all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes that have been replaced or Notes for whose payment money or securities have theretofore been held in and thereafter repaid to the Company, as provided in Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or (b) (i) all such Notes mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (ii) the Company irrevocably deposits in trust with the Trustee during such one-year period, under the terms of an irrevocable trust agreement in form satisfactory to the Trustee, as trust funds solely for the benefit of the Holders of such Notes for that purpose, money or Government Securities sufficient (in the opinion of a nationally recognized firm of independent public accountants expressed 42 in a written certification thereof delivered to the Trustee), without consideration of any reinvestment of any interest thereon, to pay principal, premium, if any, and interest on such Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (iii) no Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit, (iv) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound, (v) if at such time the Notes are listed on a national securities exchange, the Notes will not be delisted as a result of such deposit, defeasance and discharge, and (vi) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. With respect to the foregoing clause (a), the Company's obligations under Section 7.07 shall survive. With respect to the foregoing clause (b), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.13, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes have matured or have been redeemed. Thereafter, only the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture, and the Subsidiary Guarantor's obligations under the Guarantee and this Indenture, except for those surviving obligations specified above. SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The Company and the Guarantors will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 123rd day after the date of the deposit referred to in clause (a) of this Section 8.02 and the provisions of this Indenture will no longer be in effect with respect to the Notes if: (a) with reference to this Section 8.02, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee and has conveyed all right, title and interest for the benefit of the Holders, under the terms of an irrevocable trust agreement in form satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to money and/or Government Securities that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and Notes; (b) such deposit will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (c) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both could become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit; (d) the Company shall have delivered to the Trustee (i) either (A) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders will not recognize additional income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this Section 8.02 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, or (B) an Opinion of Counsel to the same effect as the ruling described in clause (A) above accompanied by a ruling to that effect published by the Internal Revenue Service, unless there has been a change in the applicable federal income tax law since the Closing Date such that a ruling from the Internal Revenue Service is no longer required and (ii) an Opinion of Counsel to the effect that (A) the creation of the defeasance trust does not violate the 43 Investment Company Act of 1940 and (B) after the passage of 123 days following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; (e) if at such time the Notes are listed on a national securities exchange, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge; and (f) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02 have been complied with. Notwithstanding the foregoing, prior to the end of the post deposit period referred to in clause (d)(ii)(B) of this Section 8.02, none of the Company's obligations under this Indenture shall be discharged. Subsequent to the end of such period with respect to this Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.13, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes mature or are redeemed. Thereafter, only the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and when a ruling from the Internal Revenue Service or an Opinion of Counsel referred to in clause (d)(i) of this Section 8.02 may be provided specifically without regard to, and not in reliance upon, the continuance of the Company's obligations under the first sentence of Section 4.01, then the Company's obligations under such sentence shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's and each Guarantor's obligations under the Notes, any Notes Guaranty and this Indenture except for those surviving obligations in the immediately preceding paragraph. SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. The Company and the Subsidiary Guarantors may omit to comply with any term, provision or condition set forth in clauses (iii) and (iv) of Section 5.01 and Sections 4.02 through 4.17 (except for any covenant otherwise required by the TIA), and clauses (c) and (d) of Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01, clause (e) of Section 6.01 with respect to Sections 4.03 through 4.17, except as aforesaid, and clause (f) of Section 6.01 shall be deemed not to be Events of Default, in each case with respect to the outstanding Notes and Loral Space shall not be required to comply with analogous provisions of the Loral Space Guaranty and the analogous provisions of the Loral Space Guaranty shall not be Loral Space Events of Default if: (a) with reference to this Section 8.03, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee and has conveyed all right, title and interest for the benefit of the Holders, under the terms of an irrevocable trust agreement in form satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to money and/or Government Securities that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and Notes; (b) such deposit will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (c) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both could become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit; 44 (d) the Company shall have delivered to the Trustee (i) either (A) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders will not recognize additional income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this Section 8.03 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, deference and discharge had not occurred, or (B) an Opinion of Counsel to the same effect as the ruling described in clause (A) above accompanied by a ruling to that effect published by the Internal Revenue Service, unless there has been a change in the applicable federal income tax law since the Closing Date such that a ruling from the Internal Revenue Service is no longer required and (ii) an Opinion of Counsel the effect that (A) the creation of the defeasance trust does not violate the Investment Company Act of 1940 and (B) after the passage of 123 days following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; (e) if at such time the Notes are listed on a national securities exchange, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge; and (f) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.03 have been complied with. SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to Sections 8.05 and 8.06, the Trustee or Paying Agent shall hold in trust money or Government Securities deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be, and shall apply the deposited money and the money from Government Securities in accordance with the Notes and this Indenture to the payment of principal of, premium, if any, and interest on the Notes; but such money need not be segregated from other funds except to the extent required by law. SECTION 8.05. REPAYMENT TO COMPANY. Subject to Sections 7.07, 8.01. 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the Company upon request set forth in an Officers' Certificate any excess money held by them at any time and thereupon shall be relieved from, all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent before being required to make any payment may cause to be published at the expense of the Company once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and the Subsidiary Guarantors' obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or Government Securities in accordance with Section 8.01. 8.02 or 8.03. as the case may be; provided that, if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. 45 SECTION 8.07. DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT. If, in the event the Company exercises its option to omit compliance with certain covenants and provisions of the Indenture with respect to the Notes pursuant to Section 8.03 and such Notes are declared due and payable because of an Event of Default that remains applicable, and the amount of money and/or Government Securities on deposit with the Trustee is insufficient to pay amounts due on such Notes due to a declaration of acceleration under Section 6.02, the Company will remain liable for such payments. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when authorized by Board Resolution, and the Trustee may amend or supplement this Indenture, and the Notes without notice to, or the consent of, any Holder: (a) to cure any ambiguity, defect or inconsistency in this Indenture, provided that, in the good faith opinion of the Board of Directors as evidenced by the Board Resolution providing authorization therefor, such amendments or supplements do not materially and adversely affect the interests of the Holders; (b) to comply with Article Five; (c) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (d) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes; (e) to make any change that, in the good faith opinion of the Board of Directors evidenced by a Board Resolution providing authorization therefor, does not materially and adversely affect the rights of the Holders; (f) to add any additional Events of Default; or (g) to add a Subsidiary Guarantor. SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Sections 6.04 and 6.07 and without prior notice to the Holders, the Company, when authorized by its Board of Directors (as evidenced by a Board Resolution), the Subsidiary Guarantors and the Trustee May amend this Indenture and the Notes with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding. Notwithstanding the provisions of this Section 9.02, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.04, may not: (i) change the Stated Maturity of the principal of, or any installment of interest on, any Note; (ii) reduce the principal amount of, or premium, if any, or interest on, any Note; (iii) change the place or currency of payment of principal of, or premium. if any, or interest on, any Note; (iv) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the Redemption Date) of any Note; (v) reduce the above-stated percentage of outstanding Notes the consent of whose Holders is necessary to modify or amend the Indenture; (vi) waive a default in the payment of principal of, premium, if any, or interest on the Notes; 46 (vii) reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults; or (viii) release the Guarantors from their Note Guarantees except pursuant to Section 4.02. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing such amendment, supplement or waiver. The Company will mail supplemental indentures to Holders upon request. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.03. REVOCATION AND EFFECT OF CONSENT. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the Note of the consenting Holder, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note or portion of its Note. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date any such amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders of Certificated Notes entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then, notwithstanding the last two sentences of the immediately preceding paragraph, those persons who were Holders of Certificated Notes at such record date (or their duly designated proxies) and only those persons shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders of such Certificated Notes after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it is of the type described in any of clauses (a) through (h) of Section 9.02. In case of an amendment or waiver of the type described in clauses (a) through (h) of Section 9.02. the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder of a Note that evidences the same indebtedness as the Note of such consenting Holder. SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver such Note to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Note thereafter authenticated. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. The Trustee shall execute any such amendment, supplement or waiver upon satisfaction of the conditions precedent thereto contained herein unless such amendment, supplement or waiver adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the TIA as then in effect. 47 ARTICLE TEN GUARANTEE OF NOTES SECTION 10.01. SUBSIDIARY GUARANTEE. Subject to the provisions of this Article Ten, each Subsidiary Guarantor hereby jointly and severally, fully, unconditionally and irrevocably guarantees on a senior basis to each Holder and to the Trustee on behalf of the Holders: (i) the due and punctual payment of the principal of, premium, if any, and accrued interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of and interest, if any, on the Notes, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms of such Note and this Indenture and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at Stated Maturity, by acceleration or otherwise. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, the benefit of discussion, protest or notice with respect to any such Note or the debt evidenced thereby and all demands whatsoever, and covenants that its Guarantee will not be discharged as to any such Note except by payment in full of the principal thereof and interest thereon and as provided in Section 8.01, Section 8.02 and Section 8.03 (subject to Section 8.06). The maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Article Ten. In the event of any declaration of acceleration of such obligations as provided in Article Six, such obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor jointly and severally, for the purpose of this Article Ten. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article Six, the Trustee shall promptly make a demand for payment on the Notes under each Guarantee provided for in this Article Ten. If the Trustee or the Holder of any Note is required by any court or otherwise to return to the Company or any Subsidiary Guarantor, or any custodian, receiver, liquidator, trustee, sequestrator or other similar official acting in relation to the Company or such Subsidiary Guarantor, any amount paid to the Trustee or such Holder in respect of a Note, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor further agrees, to the fullest extent that it may lawfully do so, that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of its Guarantee, notwithstanding any stay, injunction or other prohibition extant under any applicable bankruptcy law preventing such acceleration in respect of the obligations guaranteed hereby. Each Subsidiary Guarantor hereby further agrees that its obligations under this Indenture and the Notes shall be unconditional, regardless of the validity, regularity or enforceability of this Indenture or the Notes, the absence of any action to enforce this Indenture or the Notes, any waiver or consent by any Holder with respect to any provisions of this Indenture or the Notes, any modification or amendment of, or supplement to, this Indenture or the Notes, the recovery of any judgment against the Company or any action to enforce any such judgment, or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor that makes or is required to make any payment in respect of its Guarantee shall be entitled to seek contribution from the other Subsidiary Guarantors to the extent permitted by applicable law; provided that each Subsidiary Guarantor agrees that any such claim for contribution that such Subsidiary Guarantor may have against any other Subsidiary Guarantor shall be subrogated to the prior payment in full, in cash, of all obligations owed to Holders under or in respect of the Notes. Each Subsidiary Guarantor hereby irrevocably defers, until the principal of, premium, if any, and interest on the Notes shall have been paid in full, any claim or other rights which it may now or hereafter 48 acquire against the Company that arise from the existence, payment, performance or enforcement of its obligations under its Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Company or any collateral which any such Holder or the Trustee on behalf of such Holder hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Subsidiary Guarantor in violation of the preceding sentence and the principal of, premium, if any, and accrued interest on the Notes shall not have been paid in full, such amount shall be deemed to have been paid to such Subsidiary Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee for the benefit of the Holders to be credited and applied upon the principal of, premium, if any, and accrued interest on the Notes. Each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the issuance of the Notes pursuant to this Indenture and that the waivers set forth in this Section 10.01 are knowingly made in contemplation of such benefits. Each Subsidiary Guarantee set forth in this Section 10.01 shall not be valid or become obligatory for any purpose with respect to a Note until the certificate of authentication on such Note shall have been signed by or on behalf of the Trustee. SECTION 10.02. OBLIGATIONS UNCONDITIONAL. Subject to Section 10.05, nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among each Subsidiary Guarantor and the Holders, the obligation of each Subsidiary Guarantor, which is absolute and unconditional, upon failure by the Company, to pay to the Holders the principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of each Subsidiary Guarantor, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture. Without limiting the foregoing, nothing contained in this Article Eleven will restrict the right of the Trustee or the Holders to take any action to declare the Guarantee to be due and payable prior to the Stated Maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder. SECTION 10.03. NOTICE TO TRUSTEE. Each Subsidiary Guarantor shall give prompt written notice to the Trustee of any fact known to such Subsidiary Guarantor which would prohibit the making of any payment to or by the Trustee in respect of its Guarantee pursuant to the provisions of this Article Ten. SECTION 10.04. THIS ARTICLE NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a payment on account of principal of, premium, if any, or accrued interest on the Notes by reason of any provision of this Article will not be construed as preventing the occurrence of an Event of Default. SECTION 10.05. NET WORTH LIMITATION. Notwithstanding any other provision of this Indenture or the Notes, the Guarantee shall not be enforceable against any Subsidiary Guarantor in an amount in excess of the net worth of such Subsidiary Guarantor at the time that determination of such net worth is, under applicable law, relevant to the enforceability of such Guarantee. The Subsidiary Guarantor's net worth shall include any claim of the Subsidiary Guarantor against the Company or any other Guarantor (including the Parent Guarantor) for reimbursement and any claim against any other Guarantor (including the Parent Guarantor) for contribution. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TRUST INDENTURE ACT OF 1939. This Indenture shall be subject to the provisions of the TIA that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. 49 SECTION 11.02. NOTICES. Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first class mail or telecopier communication, addressed as follows, and received by the addressee: if to the Company or the Subsidiary Guarantors: Loral CyberStar, Inc. c/o Loral SpaceCom Corporation 600 Third Avenue NY, NY 10016 Telecopier No: (212) 338-5320 Attention: Avi Katz with a copy to: Willkie Farr & Gallagher 787 Seventh Avenue New York, New York 10019 Telecopier No.: (212) 728-8111 Attention: Bruce R. Kraus, Esq. if to the Trustee: Bankers Trust Company 4 Albany Street, 4th Floor Mailstop 5041 New York, NY 10006 Telecopier No.: (201) 593-6527 Attention: Corporate Trust and Agency Group with a copy to: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th Street New York, NY 10019 Telecopier No.: (212) 424-8500 Attention: Rachel B. Coan, Esq. The Company, the Trustee or the Depositary by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder of a Certificated Note shall be mailed to him at his address as it appears on the Register by first class mail and shall be sufficiently given to him if so mailed within the time prescribed. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Agent at the same time. Failure to mail a notice or communication to a Holder as provided herein or any defect in it shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed in the manner provided in this Section 11.02, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 50 In case by mason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (c) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; provided, however, that, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 11.05. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 11.05. (b) The ownership of Notes shall be proved by the Register. (c) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note or the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other act, but the Company shall have no obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. 51 If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for purposes of determining whether Holders of the requisite proportion of Notes then outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other act, and for this purpose the Notes then outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other act by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.07. PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest Payment Date, Redemption Date, Payment Date or Stated Maturity of any Note shall not be a Business Day, then payment of principal amount of, premium, if any, or interest on such Note, as the case may be, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Payment Date or Redemption Date, or at the Stated Maturity of such Note, provided that no interest shall accrue for the period from and after such Interest Payment Date, Payment Date, Redemption Date or Stated Maturity, as the case may be. SECTION 11.08. GOVERNING LAW. This Indenture and the Notes shall be governed by the laws of the State of New York. SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any Subsidiary of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. NO RECOURSE AGAINST OTHERS. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company contained in this Indenture or in any of the Notes, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person, as such, of the Company or any Guarantor or of any successor Person thereof, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes. SECTION 11.11. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. DUPLICATE ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 11.13. SEPARABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.14. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof. 52 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. LORAL CYBERSTAR, INC. BANKERS TRUST COMPANY, as Trustee By: By: - ---------------------------------------------- ---------------------------------------------- Name: Name: Title: Title: THE SUBSIDIARY GUARANTOR LORAL ASIA PACIFIC SATELLITE (HK) LIMITED By: - ---------------------------------------------- Name: Title:
EXHIBIT A FORM OF GLOBAL NOTE [FACE OF NOTE] THIS NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(A) OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (III) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF LORAL CYBERSTAR, INC. LORAL CYBERSTAR, INC. 10% SENIOR NOTE DUE 2006 CUSIP [____________] $________ No. _____ Issue Date: [December [ ], 2001] LORAL CYBERSTAR, INC., a Delaware corporation (the "COMPANY", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to , or its registered assigns, the principal sum of United States Dollars (U.S.$ ) on July 15, 2006. Interest Payment Dates: January 15 and July 15, commencing July 15, 2002. Regular Record Dates: January 1 and July 1. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which provisions shall have the same effect as if set forth hereon. A-2 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer. Date: LORAL CYBERSTAR, INC. By: ------------------------------------ Name: Title: This is one of the 10% Senior Notes due 2006 described in the within-mentioned Indenture. BANKERS TRUST COMPANY, as Trustee By: ------------------------------------ Authorized Signatory A-3 [REVERSE SIDE OF NOTE] LORAL CYBERSTAR, INC. 10% SENIOR NOTE DUE 2006 1. PRINCIPAL AND INTEREST. Loral Cyberstar, Inc. (the "COMPANY") will pay the principal of this Note on July 15, 2006. The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate per annum shown above. Interest on the Notes shall accrue at the rate of 10% per annum (the "INTEREST RATE") and shall be payable in U.S. dollars in cash semi-annually on January 15 and July 15 (each an "INTEREST PAYMENT DATE") to be paid to the person in whose name this Note is registered as of the close of business on the Regular Record Date for such interest, which shall be January 1 or July 1 (whether or not a Business Day); provided that no interest shall be payable on the principal amount of the note prior to July 15, 2002. From and after July 15, 2002, the Notes will pay interest semi-annually in cash on January 15 and July 15 of each year. Interest on the Notes will accrue from the most recent date to which interest has been paid. Interest will accrue from October 15, 2001 for the first Interest Payment Date of July 15, 2002. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Company shall pay interest on overdue principal and premium, if any, and (to the extent lawful) interest on overdue installments of interest at the rate of 12% per annum. 2. METHOD OF PAYMENT. The Company will pay interest and principal to the Depositary, with respect to any Global Note held by the Depositary. The Company will pay principal, premium, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by check payable in such money. If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent and Registrar without notice in accordance with the Indenture. The Company, any Affiliate or any Subsidiary thereof may act as the Paying Agent or Registrar. 4. INDENTURE; ISSUANCE OF ADDITIONAL NOTES. This Note is one of a duly authorized issue of Notes of the Company designated as its 10% Senior Notes due 2006, issued and to be issued under an Indenture dated as of December [ ], 2001 (the "INDENTURE"), between the Company, Loral Asia Pacific Satellite (HK) Limited, as a Subsidiary Guarantor, and Bankers Trust Company, as trustee (the "TRUSTEE"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control. The Notes are unsecured senior indebtedness of the Company. The Company may, subject to Article Four of the Indenture, issue additional Notes under the Indenture. A-4 5. OPTIONAL REDEMPTION. The Notes will be redeemable at the Company's option, in whole or in part, at any time or from time to time prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each holder's last address as it appears in the Security Register, at a Redemption Price equal to (i) the principal amount of the new notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date, plus (iii) the Make Whole Premium. The Notes will also be redeemable, at the Company's option, in whole or in part, at any time or from time to time prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each holders' last address as it appears in the Security Register, in an aggregate principal amount not to exceed $100 million, at a redemption price equal to (i) 101% of the principal amount of the Notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date. Any such redemption shall be payable only out of Excess Cash Flow. 6. SELECTION OF NOTES FOR PARTIAL REDEMPTION; EFFECT OF REDEMPTION NOTICE. In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee in its sole discretion shall deem to be fair and appropriate; provided that no Note of $1,000 in principal amount or less shall be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Upon the giving of any redemption notice, interest on Notes called for redemption will cease to accrue from and after the date fixed for redemption (unless the Company defaults in providing the funds for such redemption) and such Notes will then cease to be outstanding. 7. NOTICE OF REDEMPTION. Notice of any optional redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to the Holders to be redeemed at such Holder's registered address as it appears in the Register. 8. REPURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of any Change of Control, the Company will be obligated to make an offer to purchase all outstanding Notes pursuant to the Offer to Purchase described in the Indenture at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). A notice of such Change of Control will be mailed within 30 days after any Change of Control occurs to each Holder of Notes at such Holder's registered address as it appears in the Register. On and after the Payment Date, interest ceases to accrue on Notes or portions of Notes surrendered for purchase by the Company, unless the Company defaults in the payment of the Change of Control Payment. 9. DENOMINATION. This Global Note is in fully registered form without coupons and is denominated in an amount equal to $1,000 of principal amount or an integral multiple thereof and is transferable only in accordance with the Indenture. This Note is a Global Note. 10. PERSONS DEEMED OWNERS. The holder of this Note shall be treated as the owner of this Note for all purposes. A-5 11. UNCLAIMED MONEY. If money for the payment of principal, premium, if any, and interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its written request. After that, Holders entitled to the money must look to the Company for payment, unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company deposits with the Trustee money or Government Securities sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to redemption or Stated Maturity, the Company will be discharged from the Indenture and the Notes, except in certain circumstances for certain sections thereof, or (b) the Company will be discharged from certain covenants set forth in the Indenture. 13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries, among other things, to Incur additional Indebtedness, create Liens; pay dividends or make distributions in respect of their Capital Stock; make Investments or make certain other Restricted Payments; engage in Asset Sales; issue or sell stock of Restricted Subsidiaries; enter into transactions with stockholders or Affiliates; or, with respect to the Company, consolidate, merge or sell all or substantially all of its assets. Within 90 days after the end of the last fiscal quarter of each year, the Company must report to the Trustee on compliance with such limitations. 15. SUCCESSOR PERSONS. Generally, when a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 16. DEFAULTS AND REMEDIES. The following events will be defined as "EVENTS OF DEFAULT" in the Indenture: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) defaults in the performance or breach of the provisions of Section 5.01 of the Indenture or the failure to make or consummate an Offer to Purchase in accordance with Section 4.10 or Section 4.12 of the Indenture; (d) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; (e) there occurs with respect to (A) any issue or issues of Indebtedness of the Company, any Subsidiary Guarantor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, A-6 (B) the TT&C Financing or any refinancing thereof which is secured by substantially the same collateral (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company, any Subsidiary Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Subsidiary Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; (h) the Company, any Subsidiary Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Subsidiary Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; (i) any Notes Guaranty shall cease to be, or shall be asserted in writing by the Company or any Subsidiary Guarantor not to be, in full force and effect or enforceable in accordance with their respective terms; or (j) the occurrence of an "Event of Default" described in the Loral Space Guaranty. If an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 of the Indenture that occurs with respect to the Company or any Subsidiary Guarantor, as the case may be, or an Event of Default of the type described in clause 8 or 9 of the definition of Event of Default under the Loral Space Guaranty occurs with respect to Loral Space) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal amount of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal amount of, premium, if any, and accrued interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by the Company or the relevant Subsidiary Guarantor or Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (g) or (h) above occurs with respect to the Company or an Event of Default of the type described in clause 8 or 9 of the definition of Event of Default under the Loral Space Guaranty occurs with respect to Loral Space, the principal amount of, premium, if any, and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. A-7 The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders. A Holder may not pursue any remedy with respect to the Indenture or the Notes unless: (i) the Holder gives the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60- day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. However, such limitations do not apply to the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder. In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that it would have had to pay if it then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent Make Whole Premium shall also be come and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. 17. GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, to the extent lawful) on the Notes and all other obligations of the Company to the Holders or the Trustee under the Indenture and the Notes (a) is, jointly and severally, unconditionally guaranteed by each of the Subsidiary Guarantors pursuant to and subject to the terms of Article Ten of the Indenture; and (b) is unconditionally guaranteed by Loral Space and Communications Ltd. pursuant to the Loral Space Guaranty. 18. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may become owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. 19. NO RECOURSE AGAINST OTHERS. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in the Indenture or any Guaranty of the Notes, or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person of the Company or any Guarantor or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. A-8 20. AUTHENTICATION. This Note shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Note. 21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 22. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 23. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts of Minors Act). The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to Loral Cyberstar, Inc., [ ], Attention: [ ]. A-9 SCHEDULE A SCHEDULE OF PRINCIPAL AMOUNT OF INDEBTEDNESS EVIDENCED BY THIS NOTE The initial principal amount of indebtedness evidenced by this Note shall be $ . The following decreases/increases in the principal amount evidenced by this Note have been made:
TOTAL PRINCIPAL AMOUNT DECREASE IN INCREASE IN OF THIS GLOBAL NOTE DATE OF PRINCIPAL AMOUNT PRINCIPAL AMOUNT FOLLOWING SUCH NOTATION MADE BY OR DECREASE/INCREASE OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE DECREASE/INCREASE ON BEHALF OF TRUSTEE - --------------------- ------------------- ------------------- ---------------------- -------------------- - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------ - -------------------- ------------------ ------------------ ------------------- ------------------
A-10 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 4.10 or Section 4.12 of the Indenture, check the box: [ ] If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.10 or Section 4.12 of the Indenture, state the amount (in principal amount): $ ($1,000 or integral multiple thereof). Date: - ------------------------------ Your Signature: - -------------------------------------------------------------------------------- Signature Guarantee:(1) - -------------------------------------------------------------------------------- - --------------- (1 )The Holder's signature must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible Subsidiary Guarantor institution" as defined by Rule 17Ad-15 under the Exchange Act. A-11 ASSIGNMENT FORM I OR WE ASSIGN AND TRANSFER THIS NOTE TO: PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Print or type name, address and zip code of assignee and irrevocably appoint ____________________, as agent, to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated -------------------- Signed --------------------------------------------------------
(Sign exactly as name appears on the other side of this Note) Signature Guarantee:(1) - -------------------------------------------------------------------------------- - --------------- (1 )The Holder's signature must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible Subsidiary Guarantor institution" as defined by Rule 17Ad-15 under the Exchange Act. A-12 EXHIBIT B FORM OF CERTIFICATED NOTE [FACE OF NOTE] LORAL CYBERSTAR, INC. 10% SENIOR NOTE DUE 2006 CUSIP [__________] No. __________ $____________ Issue Date: [December [ ], 2001] LORAL CYBERSTAR, INC., a Delaware corporation (the "COMPANY", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay , or its registered assigns the principal sum of United States Dollars (U.S. $ ) on July 15, 2006. Interest Payment Dates: January 15 and July 15, commencing July 15, 2002. Regular Record Dates: January 1 and July 1. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which provisions shall have the same effect as if set forth hereon. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. Date: December [ ], 2001 LORAL CYBERSTAR, INC. By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: This is one of the 10% Senior Notes due 2006 described in the within-mentioned Indenture. BANKERS TRUST COMPANY, as Trustee By: -------------------------------------- Name: Title: B-2 [REVERSE SIDE OF NOTE] LORAL CYBERSTAR, INC. 10% SENIOR NOTE DUE 2006 1. PRINCIPAL AND INTEREST. Loral Cyberstar, Inc. (the "COMPANY") will pay the principal of this Note on July 15, 2006. The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate per annum shown above. Interest on the Notes shall accrue at the rate of 10% per annum (the "INTEREST RATE") and shall be payable in U.S. dollars in cash semi-annually on January 15 and July 15 (each an "INTEREST PAYMENT DATE") to be paid to the person in whose name this Note is registered as of the close of business on the Regular Record Date for such interest, which shall be January 1 or July 1 (whether or not a Business Day); provided that no interest shall be payable on the principal amount of this Note prior to July 15, 2002. From and after July 15, 2002, the Notes will pay interest semi-annually in cash on January 15 and July 15 of each year. Interest on the Notes will accrue from the most recent date to which interest has been paid. Interest will accrue from October 15, 2001 for the first Interest Payment Date of July 15, 2002. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Company shall pay interest on overdue principal and premium, if any, and (to the extent lawful) interest on overdue installments of interest at the rate of 12% per annum. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes to the Holder of this Note upon presentment hereof at the office of the Paying Agent of the Company maintained for that purpose in the Borough of Manhattan, the City of New York. Holders must surrender Notes to such Paying Agent to collect principal payments. The Company will pay principal, premium, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by check payable in such money. If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent and Registrar without notice in accordance with the Indenture. The Company, any Affiliate or any Subsidiary thereof may act as the Paying Agent or Registrar. 4. INDENTURE; ISSUANCE OF ADDITIONAL NOTES. This Note is one of a duly authorized issue of Notes of the Company designated as its 10% Senior Notes due 2006, issued and to be issued under an Indenture dated as of December [ ], 2001 (the "INDENTURE"), between the Company, Loral Asia Pacific Satellite (HK) Limited, as a Subsidiary Guarantor, and Bankers Trust Company, as trustee (the "TRUSTEE"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control. The Notes are unsecured senior indebtedness of the Company. The Company may, subject to Article Four of the Indenture, issue additional Notes under the Indenture. B-3 5. OPTIONAL REDEMPTION. The Notes will be redeemable at the Company's option, in whole or in part, at any time or from time to time prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each holder's last address as it appears in the Security Register, at a Redemption Price equal to (i) the principal amount of the new notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date, plus (iii) the Make Whole Premium. The Notes will also be redeemable, at the Company's option, in whole or in part, at any time or from time to time prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each holders' last address as it appears in the Security Register, in an aggregate principal amount not to exceed $100 million, at a redemption price equal to (i) 101% of the principal amount of the Notes being redeemed, plus (ii) accrued and unpaid interest, if any, to the Redemption Date. Any such redemption shall be payable only out of Excess Cash Flow. 6. SELECTION OF NOTES FOR PARTIAL REDEMPTION; EFFECT OF REDEMPTION NOTICE. In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee in its sole discretion shall deem to be fair and appropriate; provided that no Note of $l,000 in principal amount or less shall be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Upon the giving of any redemption notice, interest on Notes called for redemption will cease to accrue from and after the date fixed for redemption (unless the Company defaults in providing the funds for such redemption) and such Notes will then cease to be outstanding. 7. NOTICE OF REDEMPTION. Notice of any optional redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to the Holders to be redeemed at such Holder's registered address as it appears in the Register. 8. REPURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of any Change of Control, the Company will be obligated to make an offer to purchase all outstanding Notes pursuant to the Offer to Purchase described in the Indenture at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). A notice of such Change of Control will be mailed within 30 days after any Change of Control occurs to each Holder of Notes at such Holder's registered address as it appears in the Register. On and after the Payment Date, interest ceases to accrue on Notes or portions of Notes surrendered for purchase by the Company, unless the Company defaults in the payment of the Change of Control Payment. 9. DENOMINATION. This Certificated Note is in fully registered form without coupons and is denominated in an amount equal to $1,000 of principal amount or an integral multiple thereof and is transferable by presentation or surrender to the registrar for registration of transfer either endorsed or accompanied by a written instrument of transfer in form satisfactory to the registrar. B-4 10. PERSONS DEEMED OWNERS. The holder of this Note shall be treated as the owner of this Note for all purposes. 11. UNCLAIMED MONEY. If money for the payment of principal, premium, if any, and interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its written request. After that, Holders entitled to the money must look to the Company for payment, unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company deposits with the Trustee money or Government Securities sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to redemption or Stated Maturity, the Company will be discharged from the Indenture and the Notes, except in certain circumstances for certain sections thereof, or (b) the Company will be discharged from certain covenants set forth in the Indenture. 13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries, among other things, to Incur additional Indebtedness; create Liens; pay dividends or make distributions in respect of their Capital Stock; make Investments or make certain other Restricted Payments; engage in Asset Sales; issue or sell stock of Restricted Subsidiaries; enter into transactions with stockholders or Affiliates; or, with respect to the Company, consolidate, merge or sell all or substantially all of its assets. Within 90 days after the end of the last fiscal quarter of each year, the Company must report to the Trustee on compliance with such limitations. 15. SUCCESSOR PERSONS. Generally, when a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 16. DEFAULTS AND REMEDIES. The following events will be defined as "EVENTS OF DEFAULT" in the Indenture: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) defaults in the performance or breach of the provisions of Section 5.01 of the Indenture or the failure to make or consummate an Offer to Purchase in accordance with Section 4.10 or Section 4.12 of the Indenture; (d) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by B-5 the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; (e) there occurs with respect to (A) any issue or issues of Indebtedness of the Company, any Subsidiary Guarantor or any Significant Subsidiary having an outstanding principal amount of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (B) the TT&C Financing or any refinancing thereof which is secured by substantially the same collateral (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (f) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company, any Subsidiary Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Subsidiary Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; (h) the Company, any Subsidiary Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, any Subsidiary Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; (i) any Notes Guaranty shall cease to be, or shall be asserted in writing by the Company or any Subsidiary Guarantor not to be, in full force and effect or enforceable in accordance with their respective terms; or (j) the occurrence of an "Event of Default" described in the Loral Space Guaranty. If an Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 of the Indenture that occurs with respect to the Company or any Subsidiary Guarantor, as the case may be, or an Event of Default of the type described in clause 8 or 9 of the definition of Event of Default under the Loral Space Guaranty occurs with respect to Loral Space) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal amount of, premium, if any, and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal amount of, premium, if any, and accrued interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by the Company or the relevant Subsidiary Guarantor or Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (g) or (h) above occurs with respect to the Company or an Event of Default of the type described in clause 8 or 9 of the definition of Event of Default under the Loral Space Guaranty occurs with respect to Loral Space, the principal amount of, B-6 premium, if any, and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders. A Holder may not pursue any remedy with respect to the Indenture or the Notes unless: (i) the Holder gives the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. However, such limitations do not apply to the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder. In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that it would have had to pay if it then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent Make Whole Premium shall also be come and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. 17. GUARANTEES. Payment of principal, premium, if any, and interest (including interest on overdue principal and overdue interest, to the extent lawful) on the Notes and all other obligations of the Company to the Holders or the Trustee under the Indenture and the Notes (a) is, jointly and severally, unconditionally guaranteed by each of the Subsidiary Guarantors pursuant to and subject to the terms of Article Ten of the Indenture; and (b) is unconditionally guaranteed by Loral Space and Communications Ltd. pursuant to the Loral Space Guaranty. 18. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may become owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. 19. NO RECOURSE AGAINST OTHERS. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in the Indenture or any Guaranty of the Notes, or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had B-7 against any incorporator, stockholder, officer, director, employee or controlling person of the Company or any Guarantor or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. 20. AUTHENTICATION. This Note shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Note. 21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 22. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 23. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts of Minors Act). The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to Loral Cyberstar, Inc., [ ], Attention: [ ]. B-8 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 4.10 or Section 4.12 of the Indenture, check the box: [ ] If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.10 or Section 4.12 of the Indenture, state the amount (in principal amount): $________ ($1,000 or integral multiple thereof). Date: - ------------------------------------ Your Signature: - -------------------------------------------------------------------------------- Signature Guarantee:(1) - ------------------------------------------- - --------------- (1 )The Holder's signature must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible Subsidiary Guarantor institution" as defined by Rule 17Ad-15 under the Exchange Act. B-9 ASSIGNMENT FORM I OR WE ASSIGN AND TRANSFER THIS NOTE TO: PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ---------------------------------------------------- - ---------------------------------------------------- Print or type name, address and zip code of assignee and irrevocably appoint ________, as agent, to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated - ------------------- Signed - ---------------------------------------------------- (Sign exactly as name appears on the other side of this Note) Signature Guarantee:(1) - ------------------------------- - --------------- (1 )The Holder's signature must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible Subsidiary Guarantor institution" as defined by Rule 17Ad-15 under the Exchange Act. B-10 EXHIBIT C FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSIDIARY GUARANTORS SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE") dated as of , between (the "SUBSIDIARY GUARANTOR"), a subsidiary of Loral Cyberstar, Inc. (or its successor), a Delaware corporation (the "COMPANY"), and Bankers Trust Company, as trustee under the indenture referred to below (the "TRUSTEE"). W I T N E S S E T H: WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "INDENTURE"), dated as of December [ ], 2001 providing for the issuance of up to $675,000,000 of 10% Senior Notes due 2006 (the "NOTES"); WHEREAS, Section 4.02 of the Indenture provides that, the Company will provide to the Trustee, on the date that any Person becomes a Restricted Subsidiary, a supplemental indenture to the Indenture, executed by such new Restricted Subsidiary, providing for a full and unconditional guarantee on a senior basis by such new Restricted Subsidiary of the Company's obligations under the Notes and the Indenture; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. ISSUANCES OF GUARANTEES BY NEW RESTRICTED SUBSIDIARIES. This Supplemental Indenture is being executed and delivered pursuant to Section 4.02 of the Indenture. 3. AGREEMENTS TO GUARANTEE. The Subsidiary Guarantor hereby agrees as follows: (a) The Subsidiary Guarantor, jointly and severally with all other Subsidiary Guarantors, if any, unconditionally guarantees on a senior basis to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Notes and the obligations of the Company under the Indenture and the Notes, that: (i) the principal of, premium, if any, and interest on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest on the Notes, to the extent lawful, and all other obligations of the Company to the Holders or the Trustee thereunder shall be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Notes or any of such other obligations, that the same shall be promptly paid in full when due in accordance with the terms of the extension or renewal whether at Stated Maturity, by acceleration or otherwise. Notwithstanding the foregoing, in the event that this Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Subsidiary Guarantor under this Supplemental Indenture and its Subsidiary Guarantee shall be limited to such amount as will not, after giving effect thereto, and to all other liabilities of the Subsidiary Guarantor, result in such amount constituting a fraudulent transfer or conveyance. 4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. (a) To evidence its Subsidiary Guarantee set forth in this Supplemental Indenture, the Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Annex A hereto shall be endorsed by an officer of such Subsidiary Guarantor on each Note authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, the Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. (c) If an officer whose signature is on this Supplemental Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. (d) The delivery of the Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of the Subsidiary Guarantor. (e) The Subsidiary Guarantor hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgement against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (f) The Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Subsidiary Guarantee made pursuant to this Supplemental Indenture will not be discharged except by complete performance of the obligations contained in the Notes and the Indenture or pursuant to Section 5(b) of this Supplemental Indenture. (g) If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Supplemental Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, the Subsidiary Guarantor, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Subsidiary Guarantor, the Trustee and the Holders shall continue as though no such proceeding had been instituted. (h) The Subsidiary Guarantor hereby waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Subsidiary Guarantor as a result of any payment by such Subsidiary Guarantor under its Subsidiary Guarantee. The Subsidiary Guarantor further agrees that, as between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand: (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture for the purposes of the Subsidiary Guarantee made pursuant to this Supplemental Indenture, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; and (ii) in the event of any declaration of acceleration of such obligations as provided in Article Six, such obligations (whether or not due and payable) shall forthwith become due and payable by the C-2 Subsidiary Guarantor for the purpose of the Subsidiary Guarantee made pursuant to this Supplemental Indenture. (i) The Subsidiary Guarantor shall have the right to seek contribution from any other non-paying Subsidiary Guarantor, if any, so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee made pursuant to this Supplemental Indenture. 5. SUBSIDIARY GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. Except as set forth in Articles Four and Five of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of the Subsidiary Guarantor with or into the Company or any other Subsidiary Guarantor or shall prevent any transfer, sale or conveyance of the property of the Subsidiary Guarantor as an entirety or substantially as an entirety, to the Company or any other Subsidiary Guarantor. 6. RELEASES UPON RELEASE OF GUARANTEE OF GUARANTEED INDEBTEDNESS. Concurrently with the release or discharge of the Subsidiary Guarantor's guarantee of the Guaranteed Indebtedness (other than a release or discharge by or as a result of payment under such guarantee of Guaranteed Indebtedness), the Subsidiary Guarantor shall automatically be released from and relieved of its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto or Section 4 of this Supplemental Indenture, as the case may be. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect that such release or discharge has occurred, the Trustee shall execute any documents reasonably required in order to evidence the release of the Subsidiary Guarantor from its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto. 7. NEW YORK LAW TO GOVERN. This Supplemental Indenture shall be governed by the laws of the State of New York. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not effect the construction hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: , [SUBSIDIARY GUARANTOR] By: -------------------------------------- Name: Title: Dated: , BANKERS TRUST COMPANY, as Trustee By: -------------------------------------- Name: Title: C-3 ANNEX A TO SUPPLEMENTAL INDENTURE FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE Each Subsidiary Guarantor (as defined in the Indenture) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes, whether at Stated Maturity or an Interest Payment Date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest to the extent lawful, on the Notes and (c) that in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Notwithstanding the foregoing, in the event that the Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to such amount as will not, after giving effect thereto, and to all other liabilities of the Subsidiary Guarantor, result in such amount constituting a fraudulent transfer or conveyance. The Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which the Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual or facsimile signature of one of its authorized officers. [SUBSIDIARY GUARANTOR] By: ------------------------------------ Name: Title: C-4 EX-4.8 6 y54595a1ex4-8.txt FORM OF GUARANTY AGREEMENT EXHIBIT 4.8 LORAL SPACE & COMMUNICATIONS LTD. GUARANTY This GUARANTY dated as of December , 2001 (this "Guaranty" or this "Agreement")), is made by LORAL SPACE & COMMUNICATIONS LTD., a Bermuda company (the "Loral Space" or the "Guarantor"), in favor of BANKERS TRUST COMPANY, a New York banking corporation, as trustee under the indenture referred to below (including any successor trustee under the Indenture referred to below, the "Trustee") for the benefit of the Trustee and the holders from time to time of the Notes (as defined below). RECITALS WHEREAS, pursuant to the Indenture dated as of October 15, 2001 (the "Indenture"), among the Trustee, Loral Cyberstar, Inc., a Delaware corporation (the "Company") and the Subsidiary Guarantors party from time to time thereto, the Company will issue up to $675,000,000 aggregate principal amount of its 10% Senior Notes due 2006 (such notes, together with any notes issued in exchange for such notes or in replacement of such notes pursuant to the exchange and replacement provisions of the Indenture, being herein called the "Notes"); WHEREAS, the Company is an indirectly wholly owned subsidiary of Loral Space; WHEREAS, it is a condition to the issuance of the Notes that Loral Space provide its unconditional guarantee of the payment of the principal of, premium, if any and interest on the Notes; WHEREAS, Loral Space has duly authorized the execution, delivery and performance of this Guaranty; and WHEREAS, it is in the best interests of Loral Space to execute this Guaranty inasmuch as Loral Space will derive substantial direct and indirect benefits from the issuance of the Notes; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, Loral Space agrees, for the benefit of the Trustee and the holders from time to time of the Notes, as follows: ARTICLE I DEFINITIONS SECTION 1.01. CERTAIN TERMS. The following terms (whether or not underscored) when used in this Guaranty, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "ACQUIRED DEBT" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "ASSET SALE" means: (1) the sale, lease, transfer, conveyance or other disposition of any assets or rights, other than sales of inventory in the ordinary course of business consistent with past practices; provided that the sale, lease, transfer, conveyance or other disposition of all or substantially all of the assets of Loral Space and its Restricted Subsidiaries taken as a whole will be governed by Article V; (2) the issuance of Equity Interests in any of Loral Space's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that: (a) involves assets having a fair market value of less than $5 million; or (b) results in net proceeds to Loral Space and its Restricted Subsidiaries of less than $5 million; (2) a transfer of assets between or among Loral Space and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary to Loral Space or to another Restricted Subsidiary; (4) the sale or lease of satellites, transponders or other equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; (6) a Restricted Payment or Permitted Investment that is permitted under Section 4.04; and (7) the issuance of partnership interests by CyberStar, L.P. pursuant to participation bonuses in accordance with Section 4.3 of the CyberStar partnership agreement. "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The term "beneficially owns" shall have a corresponding meaning. "BOARD OF DIRECTORS" means the Board of Directors of Loral Space. "BUSINESS DAY" means each day which is not a Legal Holiday. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means: (1) in the case of a corporation, corporate stock; 2 (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having one of the two highest ratings obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition; (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition; and (7) the Goldman Sachs US$ Liquid Reserves Fund and other funds with substantially similar investment policies. "CONSOLIDATED CAPITAL RATIO" of any Person as of any date means the ratio of (1) the Total Indebtedness of such Person then outstanding to (2) the stockholders' equity as of such date as shown on the consolidated balance sheet of such Person in accordance with GAAP (which, in the case of Loral Space, shall include the Series C Preferred Stock) after giving pro forma effect to (a) the incurrence of any Indebtedness proposed to be incurred or the issuance of any Disqualified Stock proposed to be issued and the receipt and application of the proceeds thereof, (b) any other Indebtedness incurred, Disqualified Stock issued or preferred stock of any Subsidiary issued or the repayment or retirement of any of the foregoing since such balance sheet date and the receipt and application of the proceeds thereof, (c) any asset dispositions or asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that has occurred since such balance sheet date, in each case as if they had occurred and such proceeds had been applied on the date of such balance sheet. "CODE" means the Internal Revenue Code of 1986, as amended. 3 "CONSOLIDATED CASH FLOW" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, amounts in respect of items (1), (2) and (4) for a Restricted Subsidiary of Loral Space shall be added to Consolidated Net Income to compute Consolidated Cash Flow of Loral Space only to the extent that a corresponding percentage of the Consolidated Net Income of such Restricted Subsidiary would be permitted at the date of determination to be dividended to Loral Space by such Restricted Subsidiary without prior approval (that has not been obtained) pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED LEVERAGE RATIO" means the ratio of (1) the Total Indebtedness of Loral Space outstanding as of the most recent available quarterly or annual balance sheet to (2) the Consolidated Cash Flow of Loral Space for the four full fiscal quarters next preceding the incurrence of such Indebtedness or the issuance of such Disqualified Stock for which consolidated financial statements are available; provided that pro forma effect shall be given to (a) the incurrence of any Indebtedness proposed to be incurred or the issuance of any Disqualified Stock proposed to be issued and the receipt and application of the proceeds thereof, (b) any other Indebtedness incurred, Disqualified Stock issued or preferred stock of any Subsidiary issued or the repayment or retirement of any of the foregoing since the beginning of such four fiscal quarter period and the receipt and application of the proceeds thereof and 4 (c) any asset dispositions or asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that has occurred during such four fiscal quarter period, in each case as if they had occurred and such proceeds had been applied on the first day of such four fiscal quarter period. "CONSOLIDATED NET INCOME" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the specified person or one of its Subsidiaries; and (5) the cumulative effect of a change in accounting principles shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the sum of: (1) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date; plus (2) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of Preferred Stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such Preferred Stock. "CONSOLIDATED TANGIBLE ASSETS" of any Person means the total amount of assets (less applicable reserves and any other properly deductible items) which under GAAP would be included on a consolidated balance sheet of such Person and its Subsidiaries after deducting therefrom all goodwill (but not any other intangible assets) which under GAAP would be included on such consolidated balance sheet. "CREDIT AGREEMENT" means that certain Amended and Restated Credit and Participation Agreement among Loral SpaceCom Corporation, Space Systems/Loral, Inc., certain lending banks, Bank of America National Trust and Savings Association, as Administrative Agent, and Istituto Bancario San Paolo Di Torino S.P.A., individually and as Italian Export Financing Arranger and as Selling Bank, dated as of November 14, 1997, providing for up to $850 million of credit extensions, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "CREDIT FACILITIES" means one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or 5 letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "DESIGNATED OTHER PERMITTED CONSIDERATION" means the fair market value of non-cash consideration received by Loral Space or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Other Permitted Consideration pursuant to an Officers' Certificate, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a sale of such Designated Other Permitted Consideration. "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require Loral Space to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that Loral Space may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.04. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXISTING INDEBTEDNESS" means Indebtedness of Loral Space and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the Issue Date, until such amounts are repaid. "EXCHANGE ACT" means the Securities & Exchange Act of 1934, as amended (or any successor act) and to rules and regulations thereunder. "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by any such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "GLOBALSTAR" means Globalstar, L.P., a Delaware limited partnership. "GTL" means Globalstar Telecommunications Limited, of Bermuda Company. "GUARANTEE" means a guaranty other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements entered into in the ordinary course of business and consistent with past practices designed to protect such Person against fluctuations in interest rates or currency exchange rates. "INDEBTEDNESS" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent, in respect of: (1) borrowed money; 6 (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit, excluding letters of credit supporting obligations under customer contracts until such letters of credit are drawn; (3) banker's acceptances; (4) Capital Lease Obligations; (5) the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness; and (3) in the case of an obligation under a Hedging Obligation (a) zero if such obligation has been incurred pursuant to clause (7) of the second paragraph of Section 4.05; or (b) the notional amount of such obligation if not incurred pursuant to such clause. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of direct or indirect loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided, however, that Investments shall not include any commercially reasonable (as determined in good faith by either the Board of Directors of Loral Space or senior management of Loral Space) extensions of credit to, or Investments made in, any Person in connection with the purchase or sale of satellites or satellite services. If Loral Space or any Restricted Subsidiary of Loral Space sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of Loral Space such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of Loral Space and is not a Permitted Venture, Loral Space shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.04. "ISSUE DATE" means the date on which notes were originally issued under the Loral Space Indenture, which was January 21, 1999. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. 7 "LORAL SPACE DEFAULT" means any event that is, or with the passage of time or the giving of notice or both would be, a Loral Space Event of Default. "LORAL SPACE EVENT OF DEFAULT": A Loral Space Event of Default occurs if: (1) [Intentionally omitted]; (2) [Intentionally omitted]; (3) Loral Space fails to comply with Section 5.01; (4) Loral Space fails to comply Section 4.04, Section 4.05, Section 4.13 or Section 4.14 and such failure continues for 30 days after the notice specified below; (5) Loral Space or any of its Restricted Subsidiaries fails to comply with any of their agreements in this Guaranty (other than those referred to in clause (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified below; (6) Loral Space or any of its Restricted Subsidiaries defaults under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Loral Space or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Loral Space or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the Issue Date, if such default: (A) is caused by a failure to pay principal at maturity of such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $25 million or more; (7) any judgment or decree for the payment of money in excess of $25 million or its foreign currency equivalent at the time is entered against Loral Space or any of its Subsidiaries, remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged, waived or the execution thereof stayed within 10 days after the notice specified below; (8) Loral Space or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; or (9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against Loral Space or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of Loral Space or any Significant Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of Loral Space or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days. The foregoing will constitute Loral Space Events of Default whatever the reason for any such Loral Space Event of Default and whether it is voluntary or involuntary or is effected by operation of law or 8 pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Loral Space Default under clauses (4), (5), or (7) is not a Loral Space Event of Default until the Trustee or the holders of at least 25% in principal amount of the outstanding Notes notify Loral Space of the Loral Space Default and Loral Space does not cure such Loral Space Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". "LORAL SPACE INDENTURE" means the indenture dated as of January 15, 1999 between Loral Space and The Bank of New York, as trustee, relating to Loral Space's 9 1/2% Senior Notes due 2006. "MARKETABLE SECURITIES" means, with respect to any Asset Sale, any readily marketable equity securities that are (1) traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market and (2) issued by a corporation having a total equity market capitalization of not less than $250 million; provided that the excess of (a) the aggregate amount of securities of any one such corporation held by Loral Space and any Restricted Subsidiary over (b) ten times the average daily trading volume of such securities during the 20 immediately preceding trading days shall be deemed not to be Marketable Securities, as determined on the date of the contract relating to such Asset Sale. "NET INCOME" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by Loral Space or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness (other than Indebtedness under any one or more Credit Facilities) secured by a lien on the asset or assets that were the subject of such Asset Sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NON-RECOURSE DEBT" means Indebtedness as to which neither Loral Space nor any of its Restricted Subsidiaries (other than the Restricted Subsidiary that is the primary obligor and its 9 Subsidiaries so long as no Capital Stock of such Subsidiaries is owned by Loral Space or any other Restricted Subsidiary), (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (2) is directly or indirectly liable as a guarantor or otherwise, or (3) constitutes the lender. "OBLIGATIONS" means any principal, premium if any, interest, penalties, fees, indemnifications, guarantees, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFER TO PURCHASE" means a written offer (the "Offer") sent by Loral Space by first class mail, postage prepaid, to each Holder at his address appearing in the register for the Notes on the date of the Offer offering to purchase up to the principal amount of Notes specified in such Offer at the purchase price specified in such Offer (as determined pursuant to this Guaranty). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which shall be, subject to any contrary requirements of applicable law, not less than 30 days or more than 60 days after the date of such Offer and a settlement date for purchase of Securities within five Business Days after the Expiration Date. Loral Space shall notify the Trustee at least 15 Business Days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of Loral Space s obligation to make an Offer to Purchase, and the Offer shall be mailed by Loral Space or, at Loral Space's request, by the Trustee in the name and at the expense of Loral Space. The Offer shall contain information concerning the business of Loral Space and its Subsidiaries which Loral Space in good faith believes will enable such Holders to make an informed decision with respect to the Offer to Purchase (which at a minimum shall include (1) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to this Guaranty (which requirements may be satisfied by delivery of such documents together with the Offer), (2) a description of material developments in Loral Space's business subsequent to the date of the latest of such financial statements referred to in clause (1) (including a description of the events requiring Loral Space to make the Offer to Purchase), (3) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring Loral Space to make the Offer to Purchase and (4) any other information required by applicable law to be included therein). The Offer shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase. "OFFICER" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of Loral Space. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers. "OPINION OF COUNSEL" means an opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company, Loral Space or the Trustee. "PERMITTED BUSINESS" means any of the lines of business conducted by Loral Space and its Restricted Subsidiaries or its existing Permitted Ventures on the Issue Date and any other space or communication businesses and any business reasonably related thereto. "PERMITTED INVESTMENTS" means: (1) any Investment in Loral Space or in a Restricted Subsidiary of Loral Space; (2) any Investment in Cash Equivalents; (3) any Investment by Loral Space or any Restricted Subsidiary of Loral Space in a Person engaged in a Permitted Business, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of Loral Space; or 10 (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Loral Space or a Restricted Subsidiary of Loral Space; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.14; (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Loral Space; (6) Hedging Obligations; (7) Investments in Permitted Ventures; (8) Investments existing on the Issue Date; (9) Investments in Skybridge, L.P. that are either (a) required pursuant to the partnership agreement in existence on the Issue Date, or (b) required to avoid disproportionate dilution to Loral Space's equity interest therein pursuant to such partnership agreement or to avoid financial penalties; and (10) other Investments in any Person principally engaged in Permitted Businesses having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (10) at any time outstanding not to exceed 5% of Loral Space's Consolidated Tangible Assets. "PERMITTED LIENS" means: (1) Liens on assets of Loral Space or its Restricted Subsidiaries securing Indebtedness and other Obligations under Credit Facilities that were permitted by the Loral Space Guaranty to be incurred; (2) Liens in favor of Loral Space or any of its Restricted Subsidiaries; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with Loral Space or any Restricted Subsidiary of Loral Space; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Loral Space or the Restricted Subsidiary; (4) Liens on property existing at the time of acquisition thereof by Loral Space or any Restricted Subsidiary of Loral Space; provided that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph(b) of Section 4.05; (7) Liens existing on the Issue Date and Liens Loral Space or any Restricted Subsidiary are or may be obligated to create pursuant to agreements in existence on the Issue Date; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; 11 (9) Liens incurred in the ordinary course of business of Loral Space or any Restricted Subsidiary of Loral Space with respect to obligations that do not exceed $50 million at any one time outstanding; (10) other Liens incidental to the conduct of Loral Space's and its Restricted Subsidiaries' businesses or the ownership of their respective property not securing any Indebtedness, and which do not in the aggregate materially detract from the value of Loral Space's and its Restricted Subsidiaries' property when taken as a whole, or materially impair the use thereof in the operation of their respective businesses; and (11) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Loral Space or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Loral Space or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable), of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all customary expenses incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is junior in right of payment to the Loral Space Guaranty of the new notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is junior in right of payment to, the Loral Space Guaranty of the new notes on terms at least as favorable to the Holders of the Loral Space Guaranty of the new notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by Loral Space or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERMITTED VENTURE" means: (1) a corporation, partnership or other entity, other than a Subsidiary engaged in one or more Permitted Businesses in respect of which Loral Space or a Restricted Subsidiary (a) beneficially owns at least 20% of the Capital Stock of such entity, and (b) either is a party to an agreement providing for one or more parties to such agreement (which may or may not be Loral Space or a Subsidiary), or is a member of a group that, pursuant to the constituent documents of the applicable corporation, partnership or other entity, has the power, to direct the policies, management and affairs of such entity; or (2) Globalstar Telecommunications Limited ("Globalstar Telecommunications Limited"), so long as Globalstar, L.P. is a Permitted Venture and Globalstar Telecommunications Limited's principal asset consists of Equity Interests in Globalstar. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or agency or political subdivision thereof or any other entity. 12 "PREFERRED STOCK" of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such Person that is not an Unrestricted Subsidiary. "SEC" means the Securities and Exchange Commission. "SERIES C PREFERRED STOCK" means Loral Space's 6% Series C Convertible Redeemable Preferred Stock due 2007. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated by the SEC, as such Regulation is in effect on the Issue Date, using a percentage of 5% for such calculations instead of the percentage set forth therein. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBSIDIARY" means, with respect to any specified Person, any corporation, partnership, association or other business entity that would be required under GAAP to be consolidated in the financial statements of such Person or one or more of the other Subsidiaries of that Person (or a combination thereof). "TOTAL INDEBTEDNESS" means, at any time of determination, without duplication, the sum of (1) all Indebtedness of Loral Space and its Restricted Subsidiaries at such time, (2) the aggregate redemption price of any Disqualified Stock, and (3) the aggregate liquidation preference of any Preferred Stock of Loral Space's Restricted Subsidiaries, in each case as determined on a consolidated basis in accordance with GAAP. "UNRESTRICTED SUBSIDIARY" means any Subsidiary of Loral Space that is designated by the Board of Directors of Loral Space as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with Loral Space or any Restricted Subsidiary of Loral Space unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Loral Space or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Loral Space; (3) is a Person with respect to which neither Loral Space nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests, or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Loral Space or any of its Restricted Subsidiaries; and 13 (5) has at least one director on its board of directors that is not a director or executive officer of Loral Space or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Loral Space or any of its Restricted Subsidiaries. SECTION 1.02. INDENTURE DEFINITIONS. The term "Legal Holiday" is defined in Section 6.07. Unless otherwise defined herein or the context otherwise requires, capitalized terms used in this Guaranty, including its preamble and recitals, have the meanings provided in the Indenture. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of Loral Space dated such date prepared in accordance with GAAP but accretion of principal on such security shall not be deemed to be the incurrence of Indebtedness; (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; (9) [intentionally omitted]; and (10) the terms "redemption" and "redeemable" shall not be deemed to refer to Offers to Purchase or to repurchases pursuant to Section 4.12 of the Indenture or similar offers or repurchases. ARTICLE II GUARANTEE OF NOTES SECTION 2.01. GUARANTEE. (a) Subject to the provisions of this Article Two, Loral Space hereby, fully, unconditionally and irrevocably guarantees on a senior basis to each Holder and to the Trustee on behalf of the Holders: (i) the due and punctual payment of the principal of, premium, if any, and accrued interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of and interest, if any, on the Notes, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms of such Note, the Indenture and this Guaranty and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at Stated Maturity, by acceleration or otherwise. Loral Space hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, the benefit of discussion, protest or notice with respect to any such Note or the debt evidenced thereby and all demands whatsoever, and covenants that this Guarantee will not be discharged as to any such Note except by payment in full of the principal thereof, premium, if any, and interest thereon and as provided in Section 8.01 of the Indenture, Section 8.02 of the Indenture and Section 8.03 of the Indenture (subject to Section 8.06 of the Indenture). The maturity of the obligations guaranteed 14 hereby may be accelerated as provided in Article Six of the Indenture for the purposes of this Article Two. In the event of any declaration of acceleration of such obligations as provided in Article Six of the Indenture such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor jointly and severally, for the purpose of this Article Two. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article Six of the Indenture, the Trustee shall promptly make a demand for payment of the Notes under this Guarantee provided for in this Article Two. (b) If the Trustee or the Holder of any Note is required by any court or otherwise to return to the Company or any Guarantor, or any custodian, receiver, liquidator, trustee, bequestrator or other similar official acting in relation to the Company or any Guarantor, any amount paid to the Trustee or such Holder in respect of a Note, any Guarantee of the Notes, to the extent theretofore discharged, shall be reinstated in full force and effect. Loral Space further agrees, to the fullest extent that it may lawfully do so, that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture of the purposes of the Guarantee hereunder, notwithstanding any stay, injunction or other prohibition extant under any applicable bankruptcy law preventing such acceleration in respect of the obligations guaranteed hereby. (c) Loral Space hereby further agrees that its obligations under this Guaranty and the Notes shall be unconditional, regardless of the validity, regularity or enforceability of this Guaranty or the Notes, the absence of any action to enforce this Guaranty or the Notes, any modification or amendment of, or supplement to, this Guaranty, the Indenture or the Notes, the recovery of any judgment against the Company or any action to enforce any such judgment, or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a guarantor. (d) If Loral Space makes or is required to make any payment in respect of its Guarantee hereunder, it shall be entitled to seek contribution from the other Guarantors to the extent permitted by applicable law; provided that Loral Space agrees that any such claim for contribution that Loral Space may have against any other Guarantor shall be subrogated to the prior payment in full, in cash, of all obligations owed to Holders under or in respect of the Notes. (e) Loral Space hereby irrevocably defers, until the principal of, premium, if any, and interest on the Notes shall have been paid in full, any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of its obligations under this Guarantee and the Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Company or any collateral which any such Holder or the Trustee on behalf of such Holder hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to Loral Space in violation of the preceding sentence and the principal of, premium, if any, and accrued interest on the Notes shall not have been paid in full, such amount shall be deemed to have been paid to Loral Space for the benefit of, and held in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee for the benefit of the Holders to be credited and applied upon the principal of, premium, if any, and accrued interest on the Notes. Loral Space acknowledges that it will receive direct and indirect benefits from the issuance of the Notes pursuant to this Guaranty and that the waivers set forth in this Section 2.01 are knowingly made in contemplation of such benefits. (f) The Guarantee set forth in this Section 2.01 shall not be valid or become obligatory for any purpose with respect to a Note until the certificate of authentication on such Note shall have been signed by or on behalf of the Trustee. (g) Loral Space consents to the terms of the Indenture, including the Guarantee of the Subsidiary Guarantors included therein. 15 SECTION 2.02. OBLIGATIONS UNCONDITIONAL. Nothing contained in this Article Two or elsewhere in the Guaranty, the Indenture or in the Notes is intended to or shall impair, as among Loral Space and the Holders, the obligation of Loral Space, which is absolute and unconditional, upon failure by the Company, to pay to the Holders the principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of Loral Space, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under the Indenture. Without limiting the foregoing, nothing contained in this Article Two will restrict the right of the Trustee or the Holders to take any action to declare the Guarantee hereunder to be due and payable prior to the Stated Maturity of the Notes pursuant to Section 6.02 of the Indenture or to pursue any rights or remedies hereunder. SECTION 2.03. NOTICE TO TRUSTEE. Loral Space shall give prompt written notice to the Trustee of any fact known to it which would prohibit the making of any payment to or by the Trustee in respect of its Guarantee pursuant to the provisions of this Article Two. SECTION 2.04. THIS ARTICLE NOT TO PREVENT LORAL SPACE EVENT OF DEFAULT. The failure to make a payment on account of principal of, premium, if any, or accrued interest on the Notes by reason of any provision of this Article Two will not be construed as preventing the occurrence of a Loral Space Event of Default. ARTICLE III OPINIONS AND CERTIFICATES SECTION 3.01. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by Loral Space to the Trustee to take or refrain from taking any action under this Guaranty, Loral Space shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Guaranty relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 3.02. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Guaranty shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. 16 ARTICLE IV COVENANTS SECTION 4.01. INTENTIONALLY OMITTED. SECTION 4.02. INTENTIONALLY OMITTED. SECTION 4.03. REPORTS. (a) Whether or not required by the SEC, so long as any Notes are outstanding, Loral Space shall furnish to the Holders of Notes, within the time periods specified in the SEC's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K (or any successor forms) if Loral Space were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of Loral Space and its Subsidiaries and, with respect to the annual information only, a report on the annual financial statements by Loral Space's certified independent accountants; and (2) all current reports that would be required to be filed with the SEC on Form 8-K (or any successor form) if Loral Space were required to file such reports. (b) If Loral Space has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by this Section 4.03 shall include selected financial information, either on the face of the financial statements or in the footnotes thereto, regarding the financial condition and results of operations of Loral Space and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of Loral Space. (c) In addition, whether or not required by the SEC, Loral Space shall file a copy of all information and reports referred to in clauses (1) and (2) of paragraph (a) of this Section 4.03 with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (d) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including Loral Space's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.04. RESTRICTED PAYMENTS. (a) Loral Space will not, and will not permit any Restricted Subsidiary to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of Loral Space's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any distribution, dividend or payment in connection with any merger or consolidation involving Loral Space or any of its Restricted Subsidiaries) or to the direct or indirect holders of Loral Space's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Loral Space or to Loral Space or a Restricted Subsidiary or Loral Space); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving Loral Space) any Equity Interests of Loral Space, any Restricted Subsidiary of Loral Space or any direct or indirect parent of Loral Space; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is junior in right of payment to this Guaranty of the Notes, except the scheduled payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment 17 (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Loral Space Default or Event of Loral Space shall have occurred and be continuing or would occur as a consequence thereof; and (2) Loral Space would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to either test set forth in the proviso to paragraph (a) of Section 4.05; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by Loral Space and its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (2), (3), (4) and (6) of paragraph (b) of this Section 4.04) is less than the sum, without duplication, of: (A) 50% of the Consolidated Net Income of Loral Space for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of Loral Space's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus (B) 100% of the aggregate net cash proceeds received by Loral Space since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of Loral Space (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of Loral Space that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of Loral Space), except to the extent such net cash proceeds are used to increase the amount of dividends on Preferred Stock of Loral Space or the amount of Restricted Investments that may be made pursuant to clause (7) of paragraph (b) of this Section 4.04; plus (C) 100% of the fair market value (as determined by the Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of assets used or useful in a Permitted Business received by Loral Space since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of Loral Space (other than Disqualified Stock); plus (D) to the extent not already included in Consolidated Net Income of Loral Space for such period, if any Restricted Investment that was made by Loral Space or any Restricted Subsidiary after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment or designated amount of Unrestricted Subsidiary; plus (E) to the extent that any Unrestricted Subsidiary is designated by Loral Space as a Restricted Subsidiary after the Issue Date, an amount equal to the lesser of (i) the net book value of Loral Space's Investment in such Unrestricted Subsidiary at the time of such designation and (ii) the fair market value of Loral Space's Investment in such Unrestricted Subsidiary at the time of such designation. (b) The preceding paragraph (a) shall not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the foregoing paragraph (a) of this Section 4.04; 18 (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of Loral Space or of any Equity Interests of Loral Space or any Restricted Subsidiary in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of Loral Space) of, Equity Interests of Loral Space (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(B) of paragraph (a) of this Section 4.04; (3) the defeasance, redemption, repurchase or other acquisition of subordinated indebtedness of Loral Space with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend or distribution by a Restricted Subsidiary of Loral Space to the holders of its common Equity Interests so long as Loral Space or such Restricted Subsidiary receives at least its pro rata share (and in like form) of such dividend or distribution in accordance with its common Equity Interests; (5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Loral Space or any Restricted Subsidiary of Loral Space held by any employee of Loral Space or a Restricted Subsidiary or member of Loral Space's (or any of its Restricted Subsidiaries') management pursuant to any equity subscription agreement or stock option agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $10 million; (6) the purchase by a Restricted Subsidiary of shares of Capital Stock of Loral Space from Loral Space or the deemed repurchase of Capital Stock by Loral Space or a Restricted Subsidiary on the exercise of stock options; (7) payments of dividends by Loral Space on Preferred Stock of the Guarantor or the making of Restricted Investments by Loral Space or any Restricted Subsidiary in an aggregate amount not to exceed 100% of the aggregate net cash proceeds received by Loral Space since the Issue Date from the issue or sale of Equity Interests of Loral Space (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such dividend payment or Restricted Investment shall be excluded from clause (3)(B) of paragraph (a) of this Section 4.04; (8) the purchase by Loral Space or a Restricted Subsidiary of Equity Interests in a Restricted Subsidiary from another Person; (9) scheduled dividends payable on the Series C Preferred Stock; (10) payment of dividends on Preferred Stock of a Restricted Subsidiary; and (11) other Restricted Payments in an aggregate principal amount not to exceed $25 million; provided that Loral Space shall not and shall not permit any of its Restricted Subsidiaries to make any Restricted Payment contemplated by clauses (2) through (10) above so long as a Loral Space Default has occurred and is continuing. (c) The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued to or by Loral Space or a Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.04 shall be either (1) determined by the Board of Directors, whose resolution with respect thereto shall be delivered to the Trustee or (2) based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of international standing if the fair market value exceeds $25 million. Not later than the date of making any Restricted Payment, Loral Space shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.04 were computed, together with a copy of any fairness opinion or appraisal required by this Section 4.04. 19 SECTION 4.05. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. (a) Loral Space shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and Loral Space shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that Loral Space or any Restricted Subsidiary may incur Indebtedness (including Acquired Debt), and Loral Space may issue Disqualified Stock, and any Restricted Subsidiary may issue Preferred Stock, if, after giving effect to the incurrence of such Indebtedness or the issuance of such Disqualified Stock or Preferred Stock and the application of the proceeds thereof, no Loral Space Default would occur as a consequence of such incurrence or issuance or be continuing following such incurrence or issuance and either (1) the Consolidated Leverage Ratio of Loral Space would be less than 5.0 to 1.0, or (2) Loral Space's Consolidated Capital Ratio as of the most recent available quarterly or annual balance sheet is less than 2.0 to 1.0. (b) Nothing contained in paragraph (a) of this Section 4.05 shall prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by Loral Space and its Restricted Subsidiaries of additional Indebtedness and letters of credit pursuant to Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed $850 million as of such date of incurrence less the aggregate amount of all Net Proceeds of Asset Sales applied to repay term Indebtedness outstanding under one or more Credit Facilities pursuant to clause (1) of paragraph (b) of Section 4.14; (2) the incurrence by Loral Space and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by Loral Space of Indebtedness represented by the Notes and Loral Space's 9 1/2% Senior Notes due 2006; (4) the issuance by a Subsidiary of Preferred Stock or the incurrence by Loral Space's Subsidiaries of Non-Recourse Debt (including Acquired Debt that constitutes Non-Recourse Debt); provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of a Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of Loral Space that was not permitted by this clause (4); (5) the incurrence by Loral Space or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness)that was permitted by this Guaranty to be incurred under paragraph (a) of this Section 4.05 or clauses (2), (3) or this clause (5) of this paragraph (b); (6) the incurrence by Loral Space or any of its Restricted Subsidiaries of intercompany Indebtedness between or among Loral Space and any of its Restricted Subsidiaries; provided, however, that: (A) if Loral Space is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to all Obligations with respect to this Guaranty of the Notes; and (B) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Loral Space or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either Loral Space or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by Loral Space or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by Loral Space or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk or currency exchange rate risk; 20 (8) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock or Preferred Stock in the form of additional shares of the same class of Disqualified Stock or Preferred Stock, as the case may be, will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or Preferred Stock for purposes of this Section 4.05; (9) the incurrence by Loral Space or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (9), not to exceed $50 million; or (10) the incurrence by Restricted Subsidiaries of Guarantees of Indebtedness of Loral Space or any Restricted Subsidiary that is not subordinated to the Guaranty of the Notes. (c) Loral Space shall not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of Loral Space unless such Indebtedness is also contractually subordinated in right of payment to the Loral Space Guaranty of the Notes on substantially identical terms; provided, however, that no Indebtedness of Loral Space shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of Loral Space solely by virtue of being unsecured. (d) For purposes of determining compliance with this Section 4.05, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (10) of paragraph (b) of this Section 4.05, or is entitled to be incurred pursuant to paragraph (a) of this Section 4.05, Loral Space shall be permitted to classify such item of Indebtedness on the date of its incurrence in any manner that complies with this Section 4.05. SECTION 4.06. LIENS. Loral Space shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens. SECTION 4.07. SALE AND LEASEBACK TRANSACTIONS. Loral Space shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that Loral Space or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if: (1) Loral Space or such Restricted Subsidiary, as applicable, could have (A) incurred Indebtedness in an amount equal to the Attributable Debt relating to such Sale and Leaseback Transaction under Section 4.05 and (B) incurred a Lien to secure such Indebtedness pursuant to Section 4.06; (2) the gross cash proceeds of such Sale and Leaseback Transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee, of the property that is the subject of such Sale and Leaseback Transaction; and (3) the transaction complies with Section 4.14. SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. (a) Loral Space shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to Loral Space or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Loral Space or any of its Restricted Subsidiaries; (2) make loans or advances to Loral Space or any of its Restricted Subsidiaries; or 21 (3) transfer any of its properties or assets to Loral Space or any of its Restricted Subsidiaries. (b) The restrictions set forth in paragraph (a) of this Section 4.08 shall not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness as in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the Issue Date; (2) any customary (as conclusively determined in good faith by the Chief Financial Officer of Loral Space) encumbrance or restriction applicable to Loral Space or a Restricted Subsidiary that is contained in an agreement or instrument governing or relating to Indebtedness of Loral Space or Indebtedness contained in any Credit Facilities or Indebtedness incurred pursuant to clause (4) of paragraph (b) of Section 4.05; provided that, other than with respect to Preferred Stock of a Subsidiary or Non-Recourse Debt of a Subsidiary (including Non-Recourse Debt that is Acquired Debt), such encumbrances and restrictions permit the distribution of funds to the Guarantor in an amount sufficient for Loral Space to make the timely payment of interest, premium, if any, and principal (whether at stated maturity, by way of a sinking fund applicable thereto, by way of any mandatory redemption, defeasance, retirement or repurchase thereof, including upon the occurrence of designated events or circumstances or by virtue of acceleration upon an event of default, or by way of redemption or retirement at the option of the holder of the Indebtedness, including pursuant to offers to purchase) according to the terms of this Guaranty and other Indebtedness that is solely an obligation of Loral Space, but provided further that such agreement may nevertheless contain customary (as so determined) net worth, leverage, invested capital and other financial covenants, customary (as so determined) covenants regarding the merger of or sale of all or any substantial part of the assets of Loral Space or any Restricted Subsidiary, customary (as so determined) restrictions on transactions with affiliates and customary (as so determined) subordination provisions governing Indebtedness owed to Loral Space or any Restricted Subsidiary; (3) the Credit Agreement as in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Credit Agreement, as in effect on the Issue Date; (4) the Loral Space Indenture and the notes issued thereunder, this Guaranty and the Notes and the Guarantees of the Notes by the Subsidiary Guarantors; (5) applicable law; (6) any instrument governing Indebtedness or Capital Stock of a Person acquired by Loral Space or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Guaranty to be incurred; (7) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; 22 (8) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (3) of paragraph (a) of this Section 4.08; (9) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (10) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (11) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to such Lien; (12) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business; and (13) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. SECTION 4.09. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Loral Space Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by Loral Space and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will reduce the amount available for Restricted Payments under paragraph (a) of Section 4.04 or reduce the amount available for future Investments under one or more clauses of the definition of Permitted Investments set forth in Section 1.01, as Loral Space shall determine. That designation will only be permitted if such Investment would be permitted at that time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary set forth in Section 1.01. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Loral Space Default. SECTION 4.10. TRANSACTIONS WITH AFFILIATES. (a) Loral Space shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "AFFILIATE TRANSACTION"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to Loral Space or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Loral Space or such Restricted Subsidiary with an unrelated Person; and (2) Loral Space delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15 million, either (A) a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.10 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors or (B) an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of international standing. (b) The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject, except as set forth below, to the provisions of paragraph (a) of this Section 4.10: (1) any employment agreement entered into by Loral Space or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of Loral Space or such Restricted Subsidiary, as the case may be; 23 (2) transactions between or among Loral Space and/or its Restricted Subsidiaries; (3) any sale or other issuance of Equity Interests (other than Disqualified Stock) of Loral Space; (4) payment of reasonable directors fees to Persons who are not otherwise Affiliates of Loral Space; (5) Restricted Payments that are permitted by, and Permitted Investments that are not prohibited by, Section 4.04; and (6) transactions between the Company and/or its Restricted Subsidiaries, on the one hand, and a Permitted Venture, on the other hand, provided that the condition set forth in clause (1) of paragraph (a) of this Section 4.10 is satisfied. SECTION 4.11. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS. (a) Loral Space shall not permit any of its Restricted Subsidiaries, directly or indirectly, to Guarantee or pledge any assets to secure the payment of any other Indebtedness of Loral Space unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture or a supplemental agreement to this Guaranty or a separate Guarantee providing for the Guarantee of the payment of the Notes by such Restricted Subsidiary (a "GUARANTOR"), which Guarantee shall (1) be senior to or pari passu with such Restricted Subsidiary's Guarantee of or pledge to secure such other Indebtedness and (2) remain in effect for so long as the Guarantee or pledge to secure such other Indebtedness remains in effect. (b) No Guarantor shall incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to such Guarantor's Guarantee of the Notes on substantially identical terms; provided, however, that no Indebtedness of a Guarantor shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of such Guarantor solely by virtue of being unsecured. SECTION 4.12. BUSINESS ACTIVITIES. Loral Space shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to the extent as would not be material to Loral Space and its Restricted Subsidiaries, taken as a whole. SECTION 4.13. INTENTIONALLY OMITTED. SECTION 4.14. ASSET SALES. (a) Loral Space shall not, and shall not permit any Restricted Subsidiary to, consummate an Asset Sale unless: (1) Loral Space (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) such fair market value is (A) determined by two Officers of Loral Space if the fair market value is less than $25 million or (B) determined by the Board of Directors and evidenced by a resolution of the Board of Directors if the fair market value is $25 million or greater, and, in each case, such fair market value is set forth in an Officers' Certificate delivered to the Trustee; and (3) at least 75% of the consideration therefor received by Loral Space or such Restricted Subsidiary is in the form of cash or Cash Equivalents. Only for purposes of this clause (3), each of the following shall be deemed to be cash: (A) any liabilities (as shown on Loral Space's or such Restricted Subsidiary's most recent balance sheet), of Loral Space or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Securities) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Loral Space or such Restricted Subsidiary from further liability; 24 (B) any securities, notes or other obligations received by the Guarantor or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by Loral Space or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion); (C) any assets described in clause (2) or (4) of paragraph (b) of this Section 4.14; (D) Marketable Securities; and (E) Designated Other Permitted Consideration; provided that the aggregate fair market value (as determined pursuant to clause (2) above) of such Designated Other Permitted Consideration, taken together with the fair market value at the time of receipt of all other designated Other Permitted Consideration received pursuant to this clause (E), less the amount of net cash proceeds previously realized in cash from prior Designated Other Permitted Consideration is less than 5% of Loral Space's Consolidated Tangible Assets at the time of the receipt of such Designated Other Permitted Consideration (with the fair market value of each item of Designated Other Permitted Consideration being measured at the time received and without giving effect to subsequent changes in value). (b) Within 360 days after the receipt of any Net Proceeds from an Asset Sale, Loral Space may apply (or, in the case of clause (2), (3) or (4) below, enter into a binding commitment to apply) such Net Proceeds: (1) to repay Indebtedness of Loral Space or any Restricted Subsidiary which is not subordinated to this Guaranty; (2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business or to purchase Equity Interests of a Restricted Subsidiary from another Person; (3) to make a capital expenditure in a Permitted Business or to make an Investment in a Permitted Venture; or (4) to acquire or to acquire the right to use other long-term assets that are used or useful in a Permitted Business. (c) Pending the final application of any such Net Proceeds, Loral Space may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Guaranty. (d) Any Net Proceeds from Asset Sales that are not applied or invested as provided in paragraph (b) of this Section 4.14 shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, Loral Space shall make, or shall cause the Company to make, an Offer to Purchase to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Guaranty of the Notes containing provisions similar to those set forth in this Guaranty with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Offer to Purchase shall be equal to 101% of principal amount plus accrued and unpaid interest to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Offer to Purchase, Loral Space may use such Excess Proceeds for any purpose not otherwise prohibited by this Guaranty. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Offer to Purchase exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness tendered. Upon completion of each Offer to Purchase required by this Section 4.14, the amount of Excess Proceeds shall be reset at zero. 25 (e) Loral Space shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes required by this Section 4.14. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.14 or the definition of the Offer to Purchase, Loral Space shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the provisions of this Section 4.14 or such definition by virtue of such conflict. SECTION 4.15. ADDITIONAL AMOUNTS. (a) All payments in respect of this Guaranty will be made free and clear of, and without withholding or deduction for, any present or future taxes, duties, assessments or governmental charges of whatever nature (collectively, "TAXES") imposed, levied, collected, withheld or assessed by or within any jurisdiction in which Loral Space is then incorporated (or the jurisdiction of incorporation of any successor of Loral Space) or any other jurisdiction in which Loral Space (or such successor) is resident for tax purposes or any political subdivision or taxing authority thereof or therein (hereinafter, a "RELEVANT JURISDICTION"), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction in respect of such payment is so required, Loral Space, or any successor, shall pay such additional amounts ("ADDITIONAL AMOUNTS") as will result in receipt by each Holder of a Note of such gross amount as would have been received by such Holder or the beneficial owner with respect to such Note, as applicable, had no such withholding or deduction (including any withholding or deduction applicable to Additional Amounts payable) been required, except that no Additional Amounts will be payable for or on account of: (1) Taxes that would not have been imposed but for (A) the existence of any present or former connection between such Holder or such beneficial owner (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Holder, if such Holder is an estate, trust, partnership or corporation) and the Relevant Jurisdiction, including such Holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a national, domiciliary or resident of or treated as a resident thereof or being or having been present or engaged in a trade or business therein or having had a permanent establishment therein; or (B) Section 881(c)(3)(A) of the Code (or any successor provision); (2) any estate, inheritance, gift, sale, transfer or similar tax, assessment or other governmental charge; (3) any Tax that is imposed or withheld by reason of the failure of the Holder or beneficial owner of a Security to timely comply with a request of Loral Space, addressed to the Holder (A) to provide reasonably required or requested information concerning the nationality, residence or identity of the Holder or such beneficial owner or (B) to make any reasonably required or requested declaration, filing or claim or satisfy any reasonably required or requested information or reporting requirement, which, in the case of (A) or (B), is required or imposed by statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such Tax; provided, however, that (i) providing information required by Internal Revenue Service Forms W-8, W-9, 1001 and 4224 and any successors thereto and (ii) the execution and delivery of such forms is deemed to be reasonably required or requested; or (4) any combination of (1), (2) and (3); nor shall Additional Amounts be paid with respect to payment of the principal of or any premium or interest on any such Note, to any Holder (including any fiduciary or partnership) to the extent that the beneficial owner would not have been entitled to such Additional Amounts had it been the Holder of the Note. 26 (b) Where required by applicable law, Loral Space or any Paying Agent, as the case may be, shall also (1) make such withholding or deduction in respect of any Taxes and (2) remit the full amount withheld or deducted to the relevant authority in accordance with applicable law. Loral Space shall furnish to each Holder of Notes, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts satisfactory to the Trustee evidencing such payment by Loral Space. (c) Whenever there is mentioned in any context the payment of principal of or any premium or interest on, or in respect of, a Note, or the net proceeds received from Loral Space on the sale or exchange of any Note, such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.15 to the extent that, in such context, Additional Amounts are, were, or would be payable in respect thereof pursuant to this Section 4.15. (d) Loral Space shall pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges, or similar levies that arise in any jurisdiction from the execution, delivery, enforcement or registration of this Guaranty or any other document or instrument relating thereto, or the receipt of any payments with respect to the Notes, excluding such taxes, charges, or similar levies imposed by any jurisdiction outside of any jurisdiction in which Loral Space or the Paying Agent is located or incorporated (except those resulting from or required to be paid in connection with, the enforcement of Notes or any other such document or instrument following the occurrence of any Loral Space Event of Default with respect to the Notes), and shall indemnify the Holders for any such taxes paid by such Holders. (e) The foregoing obligations shall survive any termination, defeasance or discharge of this Guaranty. SECTION 4.16. INTENTIONALLY OMITTED. SECTION 4.17. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, Loral Space will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Guaranty and the Indenture. SECTION 4.18. PAYMENTS FOR CONSENT. Loral Space shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Guaranty or the Notes unless such consideration is offered to be paid to all Holders of Notes that consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE V MERGER, CONSOLIDATION OR SALE OF ASSETS SECTION 5.01. WHEN LORAL SPACE MAY MERGE, CONSOLIDATE OR SELL ASSETS. (a) Loral Space shall not, directly or indirectly: (x) consolidate or merge with or into another Person (whether or not Loral Space is the surviving corporation); or (y) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of Loral Space and its Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person, unless: (1) either: (A) Loral Space is the surviving corporation; or (B) the Person formed by or surviving any such consolidation or merger (if other than Loral Space) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of Bermuda, the United States, any state thereof or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than Loral Space) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall 27 have been made assumes all the obligations of Loral Space under this Guaranty pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction no Loral Space Default exists; and (4) Loral Space or the Person formed by or surviving any such consolidation or merger or to which such sale, assignment, transfer, conveyance or other disposition shall have been made (if other than Loral Space): (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of Loral Space immediately preceding the transaction; and (B) will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period or balance sheet date, as applicable, be permitted to incur at least $1.00 of additional Indebtedness pursuant to at least one of the tests set forth in the proviso to paragraph (a) of Section 4.05. (b) In addition, Loral Space shall not, directly or indirectly, lease all or substantially all of its properties or assets in one or more related transactions, to any other Person. (c) When a successor corporation, trustee, paying agent or registrar assumes all of the obligations of its predecessor under the Notes, the Indenture and this Guaranty, the predecessor shall be released from those obligations. (d) This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among Loral Space and any of its Restricted Subsidiaries. ARTICLE VI MISCELLANEOUS SECTION 6.01. AMENDMENTS, ETC. No amendment to or waiver of any provision of this Guaranty, nor consent to any departure by Loral Space herefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee (on behalf of the Holders of the Notes) pursuant to the provisions of Article of the Indenture, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 6.02. ADDRESSES FOR NOTICES TO LORAL SPACE. All notices and other communications provided to Loral Space under this Guaranty shall be in writing or by facsimile and addressed, delivered or transmitted to Loral Space at its address or facsimile number set forth on Schedule 1 hereto or at such other address or facsimile number as may be designated by Loral Space in a notice to the Trustee. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted. SECTION 6.03. NO WAIVER; REMEDIES. No failure on the part of the Trustee or any Holder of a Note to exercise, and no delay in exercise, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. No Holder shall be entitled to enforce any provision of this Note other than through the Trustee except as expressly specified in the Indenture. SECTION 6.04. JOINT AND SEVERAL. The obligations of Loral Space under this Guaranty are joint and several with the obligations of the Subsidiary Guarantors under their guaranty contained in the Indenture. SECTION 6.05. SECTION CAPTIONS. Section captions used in this Guaranty are for convenience of reference only, and shall not affect the construction of this Guaranty. 28 SECTION 6.06. SEVERABILITY AND COUNTERPARTS. Wherever possible each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. This Guaranty may be executed by the parties hereto in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Guaranty shall become effective when a counterpart hereof executed on behalf of Loral Space shall have been received by the Trustee. SECTION 6.07. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 6.08. GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 6.09. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, partner (including any general partner) employee, incorporator or stockholder, as such, of Loral Space shall have any liability for any obligations of Loral Space under this Guaranty or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes. SECTION 6.10. SUCCESSORS. All agreements of Loral Space in this Guaranty shall bind their successors. All agreements of the Trustee in this Guaranty shall bind its successors. SECTION 6.11. DEFEASANCE. The obligations of Loral Space under this Guaranty may be defeased in whole or in part under the circumstances and to the extent set forth in Article VIII of the Indenture. SECTION 6.12. JURISDICTION; CONSENT TO SERVICE OF PROCESS. LORAL SPACE HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURTS LOCATED IN THE CITY OF NEW YORK FOR ANY LAWSUITS, CLAIMS OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES NOT TO COMMENCE ANY SUCH LAWSUIT, CLAIM OR OTHER PROCEEDING EXCEPT IN SUCH COURTS. LORAL SPACE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY LAWSUIT, CLAIM, OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT COURTS LOCATED IN THE CITY OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH LAWSUIT, CLAIM OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. LORAL SPACE HAS APPOINTED AVI KATZ, ESQ. AT 600 THIRD AVENUE, NEW YORK, NEW YORK 10016, U.S.A. (HEREINAFTER REFERRED TO IN SUCH CAPACITY AS THE "PROCESS AGENT"), AS ITS AUTHORIZED AGENT UPON WHOM PROCESS MAY BE SERVED IN ANY SUCH SUIT OR PROCEEDING. LORAL SPACE REPRESENTS TO THE TRUSTEE THAT IT HAS NOTIFIED THE PROCESS AGENT OF SUCH DESIGNATION AND APPOINTMENT AND THAT THE PROCESS AGENT HAS ACCEPTED THE SAME IN WRITING. LORAL SPACE HAS AUTHORIZED AND DIRECTED THE PROCESS AGENT TO ACCEPT SUCH SERVICE. IF THE PROCESS AGENT SHALL CEASE TO ACT AS LORAL SPACE'S AGENT FOR SERVICE OF PROCESS, LORAL SPACE SHALL APPOINT WITHOUT DELAY ANOTHER SUCH AGENT AND NOTIFY THE TRUSTEE OF SUCH APPOINTMENT. 29 LORAL SPACE FURTHER AGREES THAT SERVICE OF PROCESS UPON THE PROCESS AGENT AND WRITTEN NOTICE OF SAID SERVICE TO LORAL SPACE MAILED BY FIRST CLASS MAIL OR DELIVERED TO THE PROCESS AGENT SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE TRUSTEE'S RIGHT OR THE RIGHT OF ANY PERSON CONTROLLING THE TRUSTEE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. LORAL SPACE AGREES THAT A FINAL ACTION IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER LAWFUL MANNER. IN WITNESS WHEREOF, Loral Space has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. LORAL SPACE & COMMUNICATIONS LTD. By: -------------------------------------- Name: Title: Accepted: BANKERS TRUST COMPANY as Trustee By: -------------------------------------- Title: Authorized Officer 30 SCHEDULE 1 ADDRESSES FOR NOTICE Loral Space & Communications Ltd. c/o Loral SpaceCom Corporation 600 Third Avenue New York, New York 10016 Attention: Avi Katz, Esq. Telephone No.: (212) 697-1105 Facsimile No.: (212) 338-5250 31 EX-4.9 7 y54595a1ex4-9.txt FORM OF WARRANTS AGREEMENT EXHIBIT 4.9 LORAL SPACE & COMMUNICATIONS LTD. AND THE BANK OF NEW YORK, AS WARRANT AGENT --------------------- WARRANT AGREEMENT DATED AS OF , 20 WARRANT AGREEMENT TABLE OF CONTENTS
PAGE ---- SECTION 1. Appointment of Warrant Agent................................ SECTION 2. Warrant Certificates........................................ SECTION 3. Execution of Warrant Certificates........................... SECTION 4. Registration and Countersignature........................... SECTION 5. Registration of Transfers and Exchanges..................... SECTION 6. Terms and Release of Warrants............................... SECTION 7. Payment of Taxes............................................ SECTION 8. Mutilated or Missing Warrant Certificates................... SECTION 9. Reservation of Warrant Shares............................... SECTION 10. Obtaining Stock Exchange Listings........................... SECTION 11. Adjustment of Exercise Price................................ SECTION 12. Fractional Interests........................................ SECTION 13. Notices to Warrant holders.................................. SECTION 14. Merger, Consolidation or Change of Name of Warrant Agent.... SECTION 15. Warrant Agent............................................... SECTION 16. Change of Warrant Agent..................................... SECTION 17. Notices to Company and Warrant Agent........................ SECTION 18. Supplements and Amendments.................................. SECTION 19. Successors.................................................. SECTION 20. Termination................................................. SECTION 21. Governing Law............................................... SECTION 22. Benefits of This Agreement.................................. SECTION 23. Counterparts................................................ Exhibit A Form of Warrant Certificate
i WARRANT AGREEMENT dated as of , 20 between Loral Space & Communications Ltd., a Bermuda company (the "COMPANY"), and The Bank of New York, a New York banking corporation, as Warrant Agent (the "WARRANT AGENT"). WHEREAS, the Company proposes to issue Common Stock Purchase Warrants, as hereinafter described (the "WARRANTS"), which in the aggregate initially entitle the holders thereof to purchase up to shares of Common Stock of the Company (the "COMMON STOCK") (the Common Stock issuable on exercise of the Warrants being referred to herein as the "WARRANT SHARES") pursuant to an exchange offer (the "Exchange Offer") made pursuant to a Lock-Up Agreement dated as of October 15, 2001 between the Company, Loral CyberStar, Inc., and certain holders of Loral CyberStar's Senior Notes and Senior Discount Notes; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, transfer, exchange and exercise of Warrants and other matters as provided herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Warrant Agents as is may deem necessary or desirable upon ten (10) days' prior written notice to the Warrant Agent. The Warrant Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such Co-Warrant Agent. SECTION 2. WARRANT CERTIFICATES. The certificates evidencing the Warrants (the "WARRANT CERTIFICATES") to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. SECTION 3. EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or a Vice President and by its Secretary or an Assistant Secretary. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be countersigned and delivered or disposed of he or she shall have ceased to hold such office. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned by the Warrant Agent, or disposed of by the Company, such Warrant Certificates nevertheless may be countersigned and delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. Warrant Certificates shall be dated the date of countersignature by the Warrant Agent. SECTION 4. REGISTRATION AND COUNTERSIGNATURE. The Warrant Agent, on behalf of the Company, shall hold the Warrants unnumbered and unregistered. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, the President, a Vice President, the Treasurer, the Secretary or the Chief Financial Officer of the Company, initially countersign, issue and deliver Warrants collectively for all Warrants outstanding entitling the holders thereof to purchase not more than the number of Warrant Shares referred to above in the first recital hereof and shall countersign and deliver Warrants as otherwise provided in this Agreement. The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. SECTION 5. REGISTRATION OF TRANSFERS AND EXCHANGES. The Warrant Agent shall from time to time, subject to the limitations of Section 6 hereof, register the transfer of any outstanding Warrant Certificates upon the records to be maintained by it for that purpose, upon surrender thereof duly endorsed or accompanied (if so required by the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed of by the Warrant Agent in its customary manner. Subject to the terms of this Agreement, Warrant Certificates may be exchanged at the option of the holder(s) thereof, when surrendered to the Warrant Agent at its principal corporate trust office, which is currently located at the address listed in Section 17 hereof, for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Any holder desiring to exchange a Warrant Certificate shall deliver a written request to the Warrant Agent, and shall surrender, duly endorsed or accompanied (if so required by the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, the Warrant Certificate or Certificates to be so exchanged. Warrant Certificates surrendered for exchange shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by such Warrant Agent in its customary manner. The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 5 and of Section 4 hereof, the new Warrant Certificates required pursuant to the provisions of this Section 5. SECTION 6. TERMS AND RELEASE OF WARRANTS. (a) TERMS OF WARRANTS. The initial exercise price per share at which Warrant Shares shall be purchasable upon the exercise of Warrants (the "EXERCISE PRICE") shall be $ per share. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised commencing at the opening of business on the date that such Warrant may be issued pursuant to the Exchange Offer and until 5:00 p.m., New York City time on , , to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price then in effect for such Warrant Shares. In the alternative, each Warrant holder may exercise its right, during the exercise period, to receive Warrant Shares on a net basis, such that, without the exchange of any funds, the holder receives that number of Warrant Shares otherwise issuable (or payable) upon exercise of its Warrants less that number of Warrant Shares having an aggregate Market Price (as defined below) at the time of exercise equal to the aggregate Exercise Price that would otherwise have been paid by the holder of the Warrant Shares upon such exercise. Each Warrant not exercised prior to 5:00 p.m., New York City time, on , shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. No adjustments as to dividends will be made upon exercise of the Warrants. A Warrant may be exercised upon surrender to the Company at the principal corporate trust office of the Warrant Agent, which is currently located at the address listed in SECTION 17 hereof, of the certificate 2 or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed and such other documentation as the Warrant Agent may reasonably request, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price which is set forth in the form of Warrant Certificate attached hereto as EXHIBIT A as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made (i) in cash or by certified or official bank check payable to the order of the Company in New York Clearing House Funds, or the equivalent thereof or (ii) in the manner provided in this SECTION 6. Subject to the provisions of SECTION 7 hereof, upon such surrender of Warrants and payment of the Exercise Price, the Company shall issue and cause to be delivered with all reasonable dispatch to and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants, subject to SECTION 12 hereof; provided, however, that if any Business Combination proposed to be effected by the Company as defined in SECTION 11 hereof, or a tender offer or an exchange offer for shares of Common Stock of the Company shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as reasonably practicable, but in any event not later than three business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence subject to SECTION 12 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrant Certificate or Certificates pursuant to the provisions of this SECTION 6 and of SECTION 4 hereof, and the Company, whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such purpose. The Warrant Agent may assume that any Warrant presented for exercise is permitted to be so exercised under applicable law and shall have no liability for acting in reliance on such assumption. All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be disposed of by the Warrant Agent in its customary manner. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders with reasonable prior written notice during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request. SECTION 7. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 8. MUTILATED OR MISSING WARRANT CERTIFICATES. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue and the Warrant Agent shall 3 countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of such loss, theft or destruction of such Warrant Certificate and indemnity, also satisfactory to the Company and the Warrant Agent. Applicants for such new Warrant Certificates must pay such reasonable charges as the Company may prescribe. SECTION 9. RESERVATION OF WARRANT SHARES. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Warrant Agent shall have no duty to verify availability of such shares set aside by the Company. The Company or, if appointed, the transfer agent for the Common Stock (the "TRANSFER AGENT") and every subsequent transfer agent for any shares of the Company's Common Stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's Common Stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in SECTION 12 hereof. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to SECTION 13 hereof. Before taking any action which would cause an adjustment pursuant to SECTION 11 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any commercially reasonable corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon payment of the Exercise Price therefor and issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 10. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from time to time take all commercially reasonable actions which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. SECTION 11. ADJUSTMENT OF EXERCISE PRICE. The Exercise Price and the number of Warrant Shares issuable on exercise of each Warrant are subject to adjustment from time to time as described in this Section 11 and subject to Section 12. (a) COMMON STOCK ISSUED AT LESS THAN MARKET VALUE. If the Company issues or sells any Common Stock other than Excluded Stock without consideration or for consideration per share less than the Market Price of the Common Stock (provided, however, that no sale of securities pursuant to a bona fideunderwritten public offering or equity line or private placement to non-affiliates of the Company (including without limitation the issuance of equity as consideration of partial consideration for acquisitions from persons that are not affiliates of the Company) will be deemed to be for less than Market Price), as of the day of such issuance or sale, the Exercise Price in effect immediately prior to each such issuance or sale will immediately (except as provided below) be reduced to the 4 price determined by multiplying the Exercise Price, in effect immediately prior to such issuance or sale, by a fraction, (x) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issuance or sale plus (B) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such additional shares of Common Stock so issued or sold would purchase at the Market Price on the last trading day immediately preceding such issuance or sale and (y) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale. In such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (A) the number of Warrant Shares issuable upon the exercise of each Warrant before such adjustment, and (B) the Exercise Price in effect immediately prior to the issuance giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence. For the purposes of any adjustment of the Exercise Price and the number of Warrant Shares issuable upon exercise of each Warrant pursuant to this Section 11.1(a), the following provisions shall be applicable: (1) In the case of the issuance of Common Stock for cash, the amount of the consideration received by the Company shall be deemed to be the amount of the cash proceeds received by the Company for such Common Stock before deducting therefrom any discounts or commissions allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof. (2) In the case of the issuance of Common Stock (otherwise than upon the conversion of any shares of capital stock or other securities of the Company) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors, provided, however, that such fair value as determined by the Board of Directors shall not exceed the aggregate Market Price of the shares of Common Stock being issued as of the date the Board of Directors authorizes the issuance of such shares. (3) In the case of the issuance of (A) options, warrants or other rights to purchase or acquire Common Stock (whether or not at the time exercisable) or (B) securities by their terms convertible into or exchangeable for Common Stock (whether or not at the time so convertible or exchangeable) or options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable): (A) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options, warrants or other rights to purchase or acquire Common Stock shall be deemed to have been issued at the time such options, warrants or rights are issued and for a consideration equal to the consideration (determined in the manner provided in Sections 11.1(a)(1) and (2)), if any, received by the Company upon the issuance of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the Common Stock covered thereby; (B) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (determined in the manner provided in Section 11.1(a)(1) and (2)), if any, to be received by the Company upon the conversion or exchange of such securities, or upon 5 the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof; (C) on any change in the number of shares of Common Stock deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Company upon such exercise, conversion or exchange, but excluding changes resulting from the antidilution provisions thereof (to the extent comparable to the antidilution provisions contained herein), the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant as then in effect shall forthwith be readjusted to such Exercise Price and number of Warrant Shares as would have been obtained had an adjustment been made upon the issuance of such options, warrants or rights not exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change; (D) on the expiration or cancellation of any such options, warrants or rights (without exercise), or the termination of the right to convert or exchange such convertible or exchangeable securities (without exercise), if the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall have been adjusted upon the issuance thereof, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall forthwith be readjusted to such Exercise Price and number of Warrant Shares as would have been obtained had an adjustment been made upon the issuance of such options, warrants, rights or such convertible or exchangeable securities on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights, or upon the conversion or exchange of such convertible or exchangeable securities; and (E) if the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall have been adjusted upon the issuance of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof; provided, however, that no increase in the Exercise Price shall be made pursuant to subclauses (A) and (B) of this Section 11.1(a)(3). (b) EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK GRANTS. Notwithstanding anything to the contrary set forth in this Section 6.1, no adjustment will be required in respect of issuances of Common Stock (or options to purchase Common Stock) pursuant to stock options granted prior to the date hereof or for stock options and restricted stock granted to employees after the date hereof issued to the Company's employees, officers, directors, consultants or advisors (whether or not still in such capacity on the date of exercise) under bona fide employee benefit plans or stock option plans adopted by the Board of Directors of the Company and approved by the holders of Common Stock when required by law. (c) CERTAIN REPURCHASES OF COMMON STOCK. In case the Company effects a Pro Rata Repurchase of Common Stock, then the Exercise Price shall be reduced to the price determined by multiplying the Exercise Price in effect immediately prior to the effective date of such Pro Rata Repurchase by a fraction of which the numerator shall be (x) the product of (A) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase and (B) the Market Price of a share of Common Stock on the trading day immediately preceding the first public announcement by the Company or any of its Affiliates of the intent to effect such Pro Rata Repurchase, minus (y) the aggregate purchase price of the Pro Rata Repurchase, and of which the denominator shall be the product of (x) the number of shares of Common Stock outstanding immediately prior to such Pro Rata Repurchase minus the number of shares of Common Stock so repurchased and (y) the Market Price per share of Common Stock on the trading day immediately 6 preceding the first public announcement of such Pro Rata Repurchase. In such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (A) the number of Warrant Shares issuable upon the exercise of each Warrant before such adjustment, and (B) the Exercise Price in effect immediately prior to the Pro Rata Repurchase giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence. (d) BUSINESS COMBINATIONS. In case of any Business Combination or reclassification of Common Stock (other than a reclassification of Common Stock referred to in Section 11.1(e)), any Warrant Shares issued or issuable upon exercise of this Warrant after the date of such Business Combination or reclassification will be exchangeable for the number of shares of stock or other securities or property (including cash) to which the Warrant Shares issuable (at the time of such consolidation, merger, sale, lease or conveyance) upon exercise of this Warrant immediately prior to such Business Combination or reclassification would have been entitled upon such Business Combination or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the Holder shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. In determining the kind and amount of stock, securities or the property receivable upon consummation of such Business Combination, if the holders of Common Stock have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the Holder shall have the right to make a similar election upon exercise of this Warrant with respect to the number of shares of stock or other securities or property which the Holder will receive upon exercise of this Warrant. (e) STOCK SPLITS, SUBDIVISIONS, RECLASSIFICATIONS OR COMBINATIONS. If the Company shall (1) declare a dividend or make a distribution on its Common Stock in shares of Common Stock, (2) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (3) combine or reclassify the outstanding Common Stock into a smaller number of shares, the number of Warrant Shares issuable upon exercise of this Warrant at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder after such date shall be entitled to purchase the number of Warrant Shares which such holder would have owned or been entitled to receive after such date had this Warrant been exercised immediately prior to such date. Successive adjustments in the Exercise Price shall be made whenever any event specified above shall occur. In such event the Exercise Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted to the number obtained by dividing (x) the product of (A) the number of Warrant Shares issuable upon the exercise of this Warrant before such adjustment and (B) the Exercise Price in effect immediately prior to the issuance giving rise to this adjustment by (y) the new number of shares issuable upon exercise of the Warrant determined pursuant to the immediately preceding sentence. (f) OTHER DISTRIBUTIONS. In case the Company shall fix a record date for the making of a distribution to all holders of shares of its Common Stock (1) of shares of any class other than its Common Stock or (2) of evidence of indebtedness of the Company or any Subsidiary or (3) of assets, or (4) of rights or warrants (in each case excluding (A) Ordinary Cash Dividends and (B) any dividends or distribution referred to in Section 11.1(e)) in each such case the Exercise Price in effect on the record date will be reduced by an amount equal, in the case of a distribution in cash, to the amount thereof payable per share of the Common Stock, or in the case of any other distribution, to the fair value thereof per share of the Common Stock as determined by the Board of Directors. Such reductions shall take effect on the record date for such distribution. In such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (A) the number of Warrant Shares issuable upon the exercise of this Warrant before such adjustment, and (B) the Exercise Price in effect immediately prior to the issuance giving rise to this adjustment by (y) the new Exercise Price determined in 7 accordance with the immediately preceding sentence. In the event that such distribution is not so made, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant then in effect shall be readjusted, effective as of the date when the Board determines not to distribute such shares, evidences of indebtedness, assets, rights or warrants, as the case may be, to the Exercise Price that would then be in effect and the number of Warrant Shares that would then be issuable upon exercise of this Warrant if such record date and distribution had not been fixed. (g) RULES FOR ADJUSTMENT. No adjustment in the Exercise Price or the number of Warrant Shares issuable upon the exercise of each Warrant is required if the amount of the adjustment is less than $0.01 or one-hundredth (1/100th) of a share, as the case may be; provided, however, that any adjustments which by reason of this Section 11.1(g) are not required to be made will be carried forward and given effect in any subsequent adjustment. (i) For the purposes of this Section 11.1, the term "shares of Common Stock" means (1) the class of stock designated as the Common Stock of the Company at the date hereof or (2) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from no par value to par value. (ii) Notwithstanding the foregoing, in any case which this Section 11.1 provides that an adjustment becomes effective immediately after a record date for an event, the Company may defer until the occurrence of such event (1) issuing to the Holder of any Warrant exercised after such record date and before the occurrence of such event the additional securities issuable upon such conversion before giving effect to such adjustment and (2) paying to the Holder any amount in cash in lieu of any fraction pursuant to Section 7. (iii) If the Company takes any action affecting the Common Stock, other than action described in this Section 11.1, which in the opinion of the Board of Directors of the Company would materially adversely affect the conversion rights of the Holder of the Warrants, the Exercise Price for the Warrants and/or the number of Warrant Shares received upon exercise of the Warrant may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as such Board may determine in good faith to be equitable in the circumstances. Failure of the Board of Directors of the Company to provide for any such adjustment prior to the effective date of any such action by the Company affecting the Common Stock will be evidence that the Board of Directors of the Company has determined that it is equitable to make no adjustments in the circumstances. (h) VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at its option, at any time during the term of the Warrants, reduce the then current Exercise Price or increase the number of Warrant Shares for which the Warrant may be exercised to any amount deemed appropriate by the Board of Directors of the Company; provided, however, that if the Company elects to make such adjustment, such adjustment will remain in effect for at least a 15-day period, after which time the Company may, at its option, reinstate the Exercise Price or number of Warrant Shares in effect prior to such reduction, subject to any interim adjustments pursuant to Section 11.1. (i) NOTICE OF ADJUSTMENT. Whenever the Exercise Price or number of Warrant Shares is adjusted, the Chief Financial Officer of the Company will compute the adjustments in accordance with the foregoing provisions and will prepare a certificate setting forth the adjustments and showing in reasonable detail the facts upon which such adjustments are based. A copy of such certificate will be filed promptly with the Transfer Agent. Promptly after delivery of such certificate, the Company will prepare a notice setting forth the adjustments and the date on which such adjustments become effective and will mail such notice of such adjustments to the Holder at the last address of the Holder as shown on the Warrants Register. (j) MISCELLANEOUS. Except as provided in Section 11.1, no adjustment in respect of any dividends or other payments or distributions made to Holders of securities issuable upon exercise of Warrants will be made during the term of a Warrant or upon the exercise of a Warrant. To the extent 8 (but only to the extent) that the Holder's rights hereunder have been protected by the Holder's exercise (at Holder's election and reasonable allocation) of its preemptive rights under the Investment Agreement, no adjustments will be made to the Exercise Price or the number of Warrant Shares. In addition, notwithstanding any of the foregoing, no such adjustment will be made for the issuance or conversion of (a) any Securities (as defined in the Investment Agreement) or (b) any rights under the Rights Agreement (as defined in the Investment Agreement) or any successor agreement unless such rights become exercisable (in which case they will be deemed for purposes of this Agreement to have been issued at the time they become exercisable). (k) No adjustment need be made for a transaction referred to in subsections (a) or (f) of this Section 11 if Warrant holders are to participate, without requiring the Warrants to be exercised, in the transaction on a basis and with notice that the Board of Directors of the Company reasonably determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for a change in the par value of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the amount of such cash, and no interest will accrue thereon. (l) STATEMENT ON CERTIFICATE. Irrespective of any adjustments in the number or kind of securities purchasable upon the exercise of the Warrants or the Exercise Price, the Certificates may continue to express the same price and number and kind of shares as are stated in this Certificate. (m) DEFINITIONS. For purposes of Section 11.1, the following terms shall have the following meanings: "BUSINESS COMBINATION" means (1) any consolidation, merger, share exchange or similar business combination transaction involving the Company with any person or (2) the sale, assignment, conveyance, transfer, lease or other disposition by the Company of all or substantially all of its assets. "EXCLUDED STOCK" means shares of Common Stock issued by the Company upon exercise of Warrants, as a stock dividend payable in shares of Common Stock, or upon any subdivision or split-up of the outstanding shares of capital stock in each case which is subject to Section 11.1 (e), or upon conversion or exchange of shares or other securities convertible or exchangeable for capital stock or the exercise of rights or warrants to issued to holders of common stock (but not the issuance of such securities subject to the provisions of Section 11.1(a)(3)). "MARKET PRICE" means, with respect to a particular security, on any given day, the average of the daily closing prices for 10 consecutive trading days commencing on the 5th trading day prior to the day in question or, in case no such reported sale takes place on such day, the average of the last closing bid and asked prices regular way, in either case on the New York Stock Exchange or other principal national securities exchange on which the applicable security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, (1) the average of the daily closing prices for 10 consecutive trading days commencing on the 5th trading day prior to the day in question reported by the NASDAQ Stock Market if such security is traded over-the-counter and quoted in the NASDAQ Stock Market, or (2) if such security is so traded, but not so quoted, the average of the closing reported bid and asked prices of such security as reported by the NASDAQ Stock Market or any comparable system, or (3) if such security is not listed on the NASDAQ Stock Market or any comparable system, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If such security is not listed and traded in a manner that the quotations referred to above are available for the period required hereunder, the Market Price per share of Common Stock shall be deemed to be the fair value per share of such security as determined in good faith by the Board of Directors of the Company. 9 "ORDINARY CASH DIVIDENDS" means regular quarterly cash dividends not exceeding the average amount of net income reported for such quarter. "PRO RATA REPURCHASES" means any purchase of shares of Common Stock by the Company or any Affiliate (as defined in the Investment Agreement) thereof pursuant to any tender offer or exchange offer subject to Section 13(e) of the Exchange Act, or pursuant to any other offer available to substantially all holders of Common Stock, whether for cash, shares of capital stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other person or any other property (including, without limitation, shares of capital stock, other securities or evidences of indebtedness of a subsidiary of the Company), or any combination thereof, effected while this Warrant is outstanding; provided, however, that "Pro Rata Repurchase" shall not include any purchase of shares by the Company or any Affiliate thereof made directly or indirectly in accordance with the requirements of Rule 10b-18 as in effect under the Exchange Act or any tender offer or exchange offer commenced in connection with the transactions in which this Warrant is issued. The "effective date" of a Pro Rata Repurchase shall mean the date of acceptance of shares for purchase or exchange under any tender or exchange offer which is a Pro Rata Repurchase or the date of purchase with respect to any Pro Rata Repurchase that is not a tender or exchange offer. (n) WARRANT AGENT'S DISCLAIMER. The Warrant Agent has no duty to determine when an adjustment under this SECTION 11 should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental Warrant Agreement under subsection (m) of this SECTION 11 are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section. (o) FORM OF WARRANTS. Irrespective of any adjustments in the number or kind of shares issuable upon the exercise of the Warrants or the Exercise Price, Warrants theretofore or thereafter issued may continue to express the same number and kind of shares and Exercise Price as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 12. FRACTIONAL INTERESTS. Warrants may be issued in fractional interests. Holders of fractional interests in Warrants will be entitled to purchase a number of Warrant Shares equal to the product obtained by multiplying the number of Warrant Shares issuable with respect to a full Warrant multiplied by the fractional interest owned by such holder in the Warrant. The Company may, but will not be required to, issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant is presented for exercise in full at the same time by a Holder, the exercise thereof will be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would be issuable on the exercise of any Warrant (or specified portion thereof), the Company may, in its sole discretion, issue such fraction of a Warrant Share or pay to the Holder of the Warrant an amount in cash equal to the current Market Price per share of Common Stock computed as of the trading day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction of a Warrant Share (but in no event less than an amount equal to such fraction multiplied by the Exercise Price in effect at such time). SECTION 13. NOTICES TO WARRANT HOLDERS. Upon any adjustment of the Exercise Price pursuant to SECTION 11, the Company shall promptly thereafter, and in any event within five days, (i) cause to be filed with the Warrant Agent a certificate executed by the Chief Financial Officer of the Company setting forth the number of shares of common stock issuable upon exercise of each Warrant after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register written notice of such adjustments by first-class mail, postage 10 prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this SECTION 14. The Warrant Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate. In case: (1) the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (2) the Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than regular cash dividends or dividends payable in shares of Common Stock or distributions referred to in subsection (b) of SECTION 11 hereof); or (3) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (4) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (5) the Company proposes to take any action (other than actions of the character described in SECTION 11(A) hereof) which would require an adjustment of the Exercise Price pursuant to SECTION 11 hereof; or (6) then the Company shall cause to be filed with the Warrant Agent and shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 10 calendar days prior to the applicable record date hereinafter specified, or as promptly as practicable under the circumstances in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this SECTION 13 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company. SECTION 14. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to all or substantially all the corporate trust or agency business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor warrant agent under the provisions of SECTION 16. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and in case at that 11 time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. SECTION 15. WARRANT AGENT. The Warrant Agent undertakes the duties and obligations imposed by this Agreement (and no implied duties or obligations shall be read into this Agreement against the Warrant Agent) upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: (1) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided. (2) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company. (3) The Warrant Agent may consult at any time with counsel of its own selection (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. The Warrant Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Warrant Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (4) In the absence of bad faith on its part, the Warrant Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Warrant Agent and conforming to the requirements of this Agreement. The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument (whether in its original or facsimile form) believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (5) The Company agrees to pay to the Warrant Agent such compensation for all services rendered by the Warrant Agent in the administration and execution of this Agreement as the Company and the Warrant Agent shall agree in writing to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement (including fees and expenses of its counsel) and to indemnify the Warrant Agent (and any predecessor Warrant Agent) and save it harmless against any and all claims (whether asserted by the Company, a holder or any other person), damages, losses, expenses (including taxes other than taxes based on the income of the Warrant Agent), liabilities, including judgments, costs and counsel fees and expenses, for anything done or omitted by the 12 Warrant Agent in the execution of this Agreement except as a result of its gross negligence or willful misconduct. The provisions of this SECTION 15(E) shall survive the expiration of the Warrants and the termination of this Agreement. (6) The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrant Certificates shall furnish the Warrant Agent with security and indemnity satisfactory to it for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. (7) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (8) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own gross negligence or willful misconduct. The Warrant Agent shall not be liable for any error of judgment made in good faith by it, unless it shall be proved that the Warrant Agent was grossly negligent in ascertaining the pertinent facts. Notwithstanding anything in this Agreement to the contrary, in no event shall the Warrant Agent be liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Warrant Agent has been advised of the likelihood of the loss or damage and regardless of the form of the action. (9) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. (10) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Warrant Agent shall have any liability to any holder of a Warrant Certificate or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; provided that the Company must use its reasonable best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. (11) Any application by the Warrant Agent for written instructions from the Company may, at the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by 13 the Warrant Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Warrant Agent shall not be liable for any action taken by, or omission of, the Warrant Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (12) No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights. (13) In addition to the foregoing, the Warrant Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement if such acts or omissions are in reliance upon (i) the proper execution of the certification concerning beneficial ownership appended to the form of assignment and the form of the election attached hereto unless the Warrant Agent shall have actual knowledge that, as executed, such certification is untrue, or (ii) the non-execution of such certification including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution. SECTION 16. CHANGE OF WARRANT AGENT. The Warrant Agent may at any time resign as Warrant Agent upon written notice to the Company. If the Warrant Agent shall become incapable of acting as Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or of such incapacity by the Warrant Agent or by the registered holder of a Warrant Certificate, then the registered holder of any Warrant Certificate or the Warrant Agent may apply, at the expense of the Company, to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The holders of a majority of the unexercised Warrants shall be entitled at any time to remove the Warrant Agent and appoint a successor to such Warrant Agent. If a Successor Warrant Agent shall not have been appointed within 30 days of such removal, the Warrant Agent may apply, at the expense of the Company, to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Such successor to the Warrant Agent need not be approved by the Company or the former Warrant Agent. After appointment the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent upon payment of all fees and expenses due it and its agents and counsel shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 16, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent. SECTION 17. NOTICES TO COMPANY AND WARRANT AGENT. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows: Loral Space & Communications Ltd. c/o Loral SpaceCom, Inc. 600 Third Avenue New York, NY 10016 Attention: General Counsel 14 In case the Company shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the principal corporate trust office of the Warrant Agent. Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows: The Bank of New York 101 Barclay Street, Floor 21W New York, New York 10286 Attention: Corporate Trust Administration SECTION 18. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant Certificates. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 18, the Warrant Agent shall execute such supplement or amendment. Notwithstanding anything in this Agreement to the contrary, the prior written consent of the Warrant Agent must be obtained in connection with any supplement or amendment which alters the rights or duties of the Warrant Agent. The Company and the Warrant Agent may amend any provision herein with the consent of the holders of Warrants exercisable for a majority of the Warrant Shares issuable on exercise of all outstanding Warrants. SECTION 19. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 20. TERMINATION. This Agreement will terminate on any earlier date if all Warrants have been exercised or expired without exercise. The provisions of Section 15 hereof shall survive such termination. SECTION 21. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE. SECTION 22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant Certificates. SECTION 23. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 15 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. LORAL SPACE & COMMUNICATIONS LTD. By: -------------------------------------- Title THE BANK OF NEW YORK, as Warrant Agent By: -------------------------------------- Title: 16 EXHIBIT A [FORM OF WARRANT CERTIFICATE] [FACE] EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME ,ON , 20 . No. Warrants WARRANT CERTIFICATE LORAL SPACE & COMMUNICATIONS LTD. This Warrant Certificate certifies that , or registered assigns, is the registered holder of Warrants expiring , (the "WARRANTS") to purchase shares of Common Stock, $.01 par value (the "COMMON STOCK"), of LORAL SPACE & COMMUNICATIONS LTD. (the "COMPANY"). Each Warrant entitles the holder upon exercise to receive from the Company on or before 5:00 p.m. New York City time, on , 20 , that number of fully paid and nonassessable shares of Common Stock (each, a "WARRANT SHARE") as set forth below at the exercise price (the "EXERCISE PRICE") as determined pursuant to the Warrant Agreement referenced below payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. Notwithstanding the foregoing, Warrants may be exercised without the exchange of funds pursuant to the net exercise provisions of Section 6 of the Warrant Agreement. Each Warrant is initially exercisable for one share of Common Stock. The number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence after the closing of the Exchange Offer of certain events set forth in the Warrant Agreement. The initial Exercise Price per share of Common Stock for any Warrant shall be equal to $ per share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No warrant may be exercised after 5:00 p.m., New York City time, on , 20 and to the extent not exercised by such time such warrants shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. LORAL SPACE & COMMUNICATIONS, LTD. By: -------------------------------------- [Name] President Countersigned: Dated: , 20 THE BANK OF NEW YORK, as Warrant Agent By: ---------------------------------- Authorized Signatory A-2 [FORM OF WARRANT CERTIFICATE] [REVERSE] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring , entitling the holder on exercise to receive shares of Common Stock, par value $0.01 per share, of the Company (the "COMMON STOCK"), and are issued or to be issued pursuant to a Warrant Agreement dated as of (the "WARRANT AGREEMENT"), duly executed and delivered by the Company to The Bank of New York, a New York banking corporation, as warrant agent (the "WARRANT AGENT"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "HOLDERS" or "HOLDER" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or before 5:00 p.m., New York City time, on , . The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares set forth on the face hereof may, subject to certain conditions, be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. A-3 ELECTION TO PURCHASE (TO BE EXECUTED UPON EXERCISE OF WARRANT) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith tenders payment for such shares to the order of Corporation in the amount of $ in accordance with the terms hereof unless the holder is exercising Warrants pursuant to the net exercise provisions of Section 6 of the Warrant Agreement. The undersigned requests that a certificate for such shares be registered in the name of , whose address is and that such shares be delivered to whose address is . If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant Certificate be delivered to , whose address is . Signature: Date: , 20 Signature Guaranteed: EX-5.1 8 y54595a1ex5-1.txt OPINION OF WILLKIE FARR & GALLAGHER Exhibit 5.1 [Letterhead of Willkie Farr & Gallagher] November 21, 2001 Loral CyberStar, Inc. 2440 Research Boulevard Suite 400 Rockville, Maryland 20850 Re: Registration Statement on Form S-4 File No. 333-73600 Ladies and Gentlemen: We have acted as counsel for CyberStar, Inc., a Delaware corporation (the "Company"), and have acted as such in connection with various legal matters relating to the filing of a Registration Statement on Form S-4, filed with the Securities and Exchange Commission (the "SEC") on November 16, 2001, as amended by Amendment No. 1 thereto, filed with the SEC on the date hereof (File No. 333-73600) (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"), related to the issuance of up to $675,000,000 aggregate principal amount of the Company's newly-issued 10% Senior Notes due 2006 (the "New Notes") and warrants ("Warrants") to purchase up to 6,657,096 shares of common stock, par value $0.01 per share, of Loral Space and Communications Ltd., a Bermuda corporation ("Parent"), the parent of the Company. The New Notes will be guaranteed (the "New Notes Parent Guaranty") on a senior, unsecured basis by Parent and will be guaranteed on a senior, unsecured basis by Loral Asia Pacific Satellite (HK) Limited (the "Subsidiary Guarantor"). The New Notes and Warrants will be issued pursuant to an exchange offer (the "Exchange Offer") offered to the holders of the Company's 11.25% Senior Notes Due 2007 (the "Senior Notes") and the holders of the Company's 12.50% Senior Discount Notes Due 2007 (the "Senior Discount Notes" and, together with the Senior Notes, the "Existing Notes") to exchange any and all of the Existing Notes outstanding for New Notes and Warrants. The New Notes, the New Notes Parent Guaranty and the New Notes Subsidiary Guaranty are to be issued pursuant to an Indenture (the "New Notes Indenture") governing the New Notes among the Company, Parent, the Subsidiary Guarantor and Bankers Trust Company, as trustee (the "Trustee"). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the "Act"). Loral CyberStar, Inc. November 21, 2001 Page 2 In connection with this opinion, we have examined originals or copies, certified or otherwise, identified to our satisfaction, of: (a) the Amended Certificate of Incorporation of the Company; (b) the Amended and Restated By-Laws of the Company; (c) the Registration Statement; (d) an executed copy of the New Notes Indenture; (e) certain resolutions adopted by the Executive Committee of the Board of Directors of the Company relating to the Exchange Offer, the issuance of the New Notes, the Indenture and related matters; (f) the Form T-1 of the Trustee to be filed as an exhibit to the Registration Statement; and (g) the form of the New Notes. We have also examined originals or copies, certified or otherwise identified to our satisfaction, or such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of originals of such latter documents. In making our examination of executed documents, we have assumed that the parties thereto, other than the Company, has the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due execution and delivery of such documents by the parties to such documents, and the validity and binding effect thereof. As to any facts material to the opinions expressed herein which we did not independently establish or verify, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others. We are admitted to the bar in the State of New York and do not express any opinion as to the laws of any other jurisdiction. Based upon and subject to the limitations, qualifications, exceptions and assumptions set forth above, we are of the opinion that when (1) the Registration Statement becomes effective and the New Notes Indenture has been qualified under the Trust Indenture Act of 1939, as amended and (ii) the New Notes (in the form that we have examined) have been duly executed and authenticated in accordance Loral CyberStar, Inc. November 21, 2001 Page 3 with the terms of the New Notes Indenture and have been delivered upon consummation of the Exchange Offer against receipt of Existing Notes surrendered in exchange therefor in accordance with the terms of the Exchange Offer, the New Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (1) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (2) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. We also consent to the use of our name under the caption "Legal Matters" in the prospectus that forms part of the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. Very truly yours, /s/ Willkie Farr & Gallagher EX-5.2 9 y54595a1ex5-2.txt OPINION OF APPLEBY, SPURLING & KEMPE 21 November 2001 Loral Space & Communications Ltd. 600 Third Avenue New York, New York 10016 Dear Sirs: LORAL SPACE & COMMUNICATIONS LTD (THE "COMPANY") We have acted as Bermuda counsel to the Company in connection with the Company's Registration Statement on Form S-4 (the "Registration Statement") to be filed by the Company and its subsidiary, Loral CyberStar, Inc. with the Securities and Exchange Commission (the "SEC") on 16 November, 2001, as amended by Amendment No. 1 thereto filed with the SEC on 21 November 2001 in connection with Loral CyberStar, Inc's offer to exchange Loral CyberStar's 10% Senior Notes due 2006 which shall be guaranteed by the Company and warrants (the "Warrants") to purchase up to 6,657,096 shares of Common Stock of the Company ( the "Warrant Shares") for Loral CyberStar, Inc's outstanding 11-1/4% Senior Notes due 2007 and 12-1/2% Senior Discount Notes due 2007. For the purposes of this opinion we have examined and relied upon the documents listed, and in some cases defined in the Schedule to this opinion (the "Documents") together with such other documentation as we have considered requisite to this opinion. Unless otherwise defined herein, capitalised terms have the meanings assigned to them in the Registration Statement. ASSUMPTIONS In stating our opinion we have assumed:- (a) the authenticity, accuracy and completeness of all Documents and other documentation examined by us submitted to us as originals and the conformity to authentic original documents of all Documents and other such documentation submitted to us as certified, conformed, notarised or photostatic copies; (b) that each of the Documents and other such documentation which was received by electronic means is complete, intact and in conformity with the transmission as sent; (c) the genuineness of all signatures on the Documents; 2 (d) the authority, capacity and power of natural persons signing the Documents; (e) that any representation, warranty or statement of fact or law, other than the laws of Bermuda made in any of the Documents are true, accurate and complete; (f) that there are no provisions of the laws or regulations of any jurisdiction other than Bermuda which would have any implication in relation to the opinion expressed herein and that, in so far as any obligation under, or action to be taken under the Registration Statement is required to be performed or taken in any jurisdiction outside Bermuda, the performance of such obligation or the taking of such action will constitute a valid and binding obligation of each of the parties thereto under the laws of that jurisdiction and will not be illegal by virtue of the laws of that jurisdiction; (g) that the Resolutions are in full force and effect and have not been rescinded, either in whole or in part, and accurately record the resolutions passed by the Executive Committee of the Board of Directors of the Company in a meeting which was duly convened and at which a duly constituted quorum was present and voting throughout and that there is no matter affecting the authority of the Directors to effect entry by the Company into the Transaction Agreements, not disclosed by the Constitutional Documents or the Resolutions, which would have any adverse implication in relation to the opinions expressed herein; (h) that at the time of the Resolutions the Executive Committee had been duly appointed and authorised in accordance with the Constitutional Documents of the Company and that the Resolutions have been duly passed in accordance with the authority granted to the Executive Committee by the Board of Directors of the Company; (i) that each member of the Executive Committee of the Board of Directors of the Company, when the Executive Committee of the Board of Directors of the Company passed the Resolutions, discharged his fiduciary duty owed to the Company and acted honestly and in good faith with a view to the best interests of the Company; (j) that the records which were the subject of the Company Search were complete and accurate at the time of such search and disclosed all information which is material for the purposes of this opinion and such information has not since the date of the Company Search been materially altered; (k) that the records which were the subject on of the Litigation Search were complete and accurate at the time of such search and disclosed all information which is material for the purposes of this opinion and such information has not since the date of the Litigation Search been materially altered; 3 (l) that when Warrant Shares are issued under pursuant to the exercise of the Warrants, the issue price (in whatever form) will not be less than the par value of the Shares and the Company will have sufficient authorised but unissued share capital to effect the issue and will have the necessary consent from the Bermuda Monetary Authority for such share issue. OPINION Based upon and subject to the foregoing and subject to the reservations set out below and to any matters not disclosed to us, we are of the opinion that:- (1) The Company is an exempted company incorporated with limited liability and existing under the laws of Bermuda. The Company possesses the capacity to sue and be sued in its own name and is in good standing under the laws of Bermuda. (2) The Warrants have been duly authorised by the Company for issuance and sale pursuant to the Exchange Offer according the terms set forth in the final Exchange Offer Prospectus; and when issued executed and authenticated in accordance with the provisions of the Warrant Agreement and delivered and paid for in accordance with the terms of the Exchange Offer and the final Exchange Offer Prospectus, the Warrants will be entitled to the benefits of the Warrant Agreement and will be valid and binding obligations of the Company enforceable against in accordance with their terms. (3) The Warrant Shares have been duly authorised and reserved by the Company for issuance and sale pursuant to the Warrant Agreement and when issued, executed and authenticated in accordance with the provisions of the Warrants and the Warrant Agreement upon exercise of the Warrants in accordance with the provisions thereof, the Warrant Shares will be validly issued, fully paid and non assessable, and holders of the Warrant Shares will have no liability, in their capacity as holders of the Warrant Shares for any debt or other obligation of the Company towards third parties. RESERVATIONS We have the following reservations:- (a) We express no opinion as to any law other than Bermuda law and none of the opinions expressed herein relates to compliance with or matters governed by the laws of any jurisdiction except Bermuda. This opinion is limited to Bermuda law as applied by the Courts of Bermuda as of the date hereof. (b) Any reference in this opinion to shares being "non-assessable" shall mean, in relation to fully-paid shares of the Company and subject to any contrary provision in any agreement in writing between such company and the holder of shares, that: no shareholder shall be obliged to contribute further amounts to the capital of the Company, either in order to complete payment for their shares, to 4 satisfy claims of creditors of the Company, or otherwise; and no shareholder shall be bound by an alteration of the memorandum of association or bye-laws of the Company after the date on which he became a shareholder, if and so far as the alteration requires him to take, or subscribe for additional shares, or in any way increases his liability to contribute to the share capital of, or otherwise to pay money to, the Company. (c) Where an obligation is to be performed in a jurisdiction other than Bermuda, the courts of Bermuda may refuse to enforce it to the extent that such performance would be illegal under the laws of, or contrary to public policy of, such other jurisdiction. (d) Where a person is vested with a discretion or may determine a matter in his or its opinion, such discretion may have to be exercised reasonably or such an opinion may have to be based on reasonable grounds. (e) Searches of the Register of Companies at the office of the Registrar of Companies and of the Supreme Court Causes Book at the Registry of the Supreme Court are not conclusive and it should be noted that the Register of Companies and the Supreme Court Causes Book do not reveal: (i) whether an application to the Supreme Court for a winding up petition or for the appointment of a receiver or manager has been prepared but not yet been presented or has been presented but does not appear in the Causes Book at the date and time the Search is concluded; (ii) whether any arbitration or administrative proceedings are pending or whether any proceedings are threatened, or whether any arbitrator has been appointed; (iii) details of matters which have been lodged for filing or registration which as a matter of general practice of the Registrar of Companies would have or should have been disclosed on the public file but have not actually been registered or to the extent that they have been registered have not been disclosed or do not appear in the public records at the date and time the search is concluded; (iv) details of matters which should have been lodged for registration but have not been lodged for registration at the date the search is concluded; or (v) whether a receiver or manager has been appointed privately pursuant to the provisions of a debenture or other security, unless notice of the fact has been entered in the Register of Charges in accordance with the provisions of the Companies Act 1981. 5 (f) In order to issue this opinion we have carried out the Company Search as referred to in the Schedule to this opinion on 21 November 2001 and have not enquired as to whether there has been any change since the date of such search. (g) In order to issue this opinion we have carried out the Litigation Search as referred to in the Schedule to this opinion on 21 November 2001 and have not enquired as to whether there has been any change since the date of such search. DISCLOSURE This opinion is addressed to you in connection with the Registration Statement and is not to be made available to, or relied on by any other person or entity, or for any other purpose, without our prior written consent. This opinion is addressed to you solely for your benefit and is neither to be transmitted to any other person, nor relied upon by any other person or entity or for any other purpose nor quoted or referred to in any public document nor filed with any governmental agency or person, without our prior written consent, except as may be required by law or regulatory authority. We consent to the filing of this opinion as an exhibit to the Registration Statement of the Company. We also consent to the reference to our Firm under the captions "Foreign Issuer Considerations" and "Legal Matters." Further, this opinion speaks as of its date and is strictly limited to the matters stated herein and we assume no obligation to review or update this opinion if applicable laws or the existing facts or circumstances should change. This opinion is governed by and is to be construed in accordance with Bermuda law. Yours faithfully, /s/ Appleby, Spurling & Kempe 6 SCHEDULE 1. The entries and filings shown in respect of the Company on the files of the Company maintained at the office of the Registrar of Companies in Hamilton, Bermuda, as revealed by searches completed on 21 November 2001. 2. The entries and filings shown in the Supreme Court Causes Book maintained at the Registry of the Supreme Court in Hamilton, Bermuda as revealed by searches completed on 21 November 2001. 3. A certified copy of the resolutions unanimously adopted by the Executive Committee of the Board of Directors of the Company at a meeting which was duly called and held on 21 November 2001 (the "Resolutions"). 4. Certified copies of the Certificate of Incorporation, Memorandum of Association and Bye-laws of the Company (together, the "Constitutional Documents"). 5. A certified copy of the Bermuda Monetary Authority Letter dated 9 November 2001 in respect of the issue of the Warrants and the Warrant Shares. 6. A copy of the final Registration Statement. EX-8.1 10 y54595a1ex8-1.txt OPINION OF WILLKIE FARR & GALLAGHER Exhibit 8.1 [Letterhead of Willkie Farr & Gallagher] November 21, 2001 Loral CyberStar, Inc. 2440 Research Boulevard Suite 400 Rockville, Maryland 20850 Re: Registration Statement on Form S-4 File No. 333-73600 Ladies and Gentlemen: We have acted as counsel for CyberStar, Inc., a Delaware corporation (the "Company"), and have acted as such in connection with various legal matters relating to the filing of a Registration Statement on Form S-4, filed with the Securities and Exchange Commission (the "SEC") on November 16, 2001, as amended by Amendment No. 1 thereto, filed with the SEC on the date hereof (File No. 333-73600) (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"), related to the issuance of up to $675,000,000 aggregate principal amount of the Company's newly-issued 10% Senior Notes due 2006 (the "New Notes") and warrants ("Warrants") to purchase up to 6,657,096 shares of common stock, par value $0.01 per share, of Loral Space and Communications Ltd., a Bermuda corporation ("Parent"), the parent of the Company. The New Notes will be guaranteed (the "New Notes Parent Guaranty") on a senior, unsecured basis by Parent and will be guaranteed on a senior, unsecured basis by Loral Asia Pacific Satellite (HK) Limited (the "Subsidiary Guarantor"). The New Notes and Warrants will be issued pursuant to an exchange offer (the "Exchange Offer") offered to the holders of the Company's 11.25% Senior Notes Due 2007 (the "Senior Notes") and the holders of the Company's 12.50% Senior Discount Notes Due 2007 (the "Senior Discount Notes" and, together with the Senior Notes, the "Existing Notes") to exchange any and all of the Existing Notes outstanding for New Notes and Warrants. The New Notes, the New Notes Parent Guaranty and the New Notes Subsidiary Guaranty are to be issued pursuant to an Indenture (the "New Notes Indenture") governing the New Notes among the Company, Parent, the Subsidiary Guarantor and Bankers Trust Company, as trustee (the "Trustee"). In so acting, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement, corporate records, agreements, documents and other instruments (the aforementioned documents together, the "Documents"), and have made such inquiries of such officers and representatives as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth. In such examination, we have assumed the authenticity of all documents submitted to us as copies, the authenticity of the originals of such documents, the genuineness of all signatures, and the correctness of all representations made therein. (The terms of the Documents are incorporated herein by reference.) We have further assumed that the final executed Documents will be substantially the Loral CyberStar, Inc. November 21, 2001 Page 2 same as those which we have reviewed and that there are no agreements or understandings between or among the parties to the Documents with respect to the transactions contemplated therein other than those contained in the Documents. Based upon the foregoing and upon consideration of applicable law, and subject to the next succeeding paragraph, it is our opinion that the discussion of the United States federal income tax matters set forth under the caption "Federal Income Tax Consequences" in the prospectus that forms part of the Registration Statement (the "Prospectus"), insofar as it sets forth statements of law or legal conclusions is accurate in all material respects and accurately summarizes our opinions and advice to the Company with respect to the material tax issues of the exchange offer. Our opinion is based on current provisions of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service and case law, any of which may be changed at any time with retroactive effect. Any change in applicable laws or facts, or any change or inaccuracy in the statements, facts or assumptions on which we have relied, may affect the continuing validity of the opinion set forth above. We assume no responsibility to inform you of any such change or inaccuracy that may occur or come to our attention. No opinion is expressed on any matters other than those specifically covered by this opinion. This opinion is limited to the federal income taxation laws of the United States and does not cover questions arising under or relating to the laws of any other jurisdiction, including without limitation, the laws of any other foreign jurisdiction or any State of the United States, the District of Columbia or any political subdivision of any of these. We hereby consent to being named in the Registration Statement and the Prospectus as counsel that has passed on the above-referenced tax matters. We also hereby consent to the use of this opinion as an exhibit to the Registration Statement. In giving such consents, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the Commission promulgated thereunder. Very truly yours, /s/ Willkie Farr & Gallagher EX-8.2 11 y54595a1ex8-2.txt OPINION OF APPLEBY, SPURLING & KEMPE 21 November 2001 Loral Space & Communications Ltd 600 Third Avenue New York, New York 10016 Dear Sirs: LORAL SPACE & COMMUNICATIONS LTD (THE "COMPANY") We have acted as Bermuda counsel to the Company in connection with the Company's Registration Statement on Form S-4 (the "Registration Statement") to be filed by the Company and its subsidiary, Loral CyberStar, Inc. with the Securities and Exchange Commission (the "SEC") on 16 November, 2001, as amended by Amendment No. 1 thereto filed with the SEC on 21 November 2001 in connection with Loral CyberStar, Inc's offer to exchange Loral CyberStar's 10% Senior Notes due 2006 Guarantee by the Company and warrants (the "Warrants") to purchase up to 6,657,096 shares of Common Stock of the Company (the "Warrant Shares") for Loral CyberStar Inc's outstanding 11-1/4% Senior Notes due 2007 and 12-1/2% Senior Discount Notes due 2007. For the purposes of this opinion we have examined and relied upon the documents listed, and in some cases defined in the Schedule to this opinion (the "Documents") together with such other documentation as we have considered requisite to this opinion. Unless otherwise defined herein, capitalised terms have the meanings assigned to them in the Registration Statement. ASSUMPTIONS In stating our opinion we have assumed:- (a) the authenticity, accuracy and completeness of all Documents and other documentation examined by us submitted to us as originals and the conformity to authentic original documents of all Documents and other such documentation submitted to us as certified, conformed, notarised or photostatic copies; (b) that each such of the Documents and other such documentation which was received by electronic means is complete, intact and in conformity with the transmission as sent; 2 (c) the genuineness of all signatures on the Documents; (d) the authority, capacity and power of natural persons signing the Documents; and (e) that any representation, warranty or statement of fact or law, other than the laws of Bermuda made in any of the Documents are true, accurate and complete. OPINION Based upon and subject to the foregoing and subject to the reservations set out below and to any matters not disclosed to us, we are of the opinion that the statements in the Registration Statement under the headings "Bermuda Tax Considerations" insofar as they purport to describe the provisions of the laws of Bermuda referred to therein, are accurate and correct in all material respects. RESERVATIONS We have the following reservations: (a) We express no opinion as to any law other than Bermuda law and none of the opinions expressed herein relates to compliance with or matters governed by the laws of any jurisdiction except Bermuda. This opinion is limited to Bermuda law as applied by the Courts of Bermuda at the date hereof. (b) Where an obligation is to be performed in a jurisdiction other than Bermuda, the courts of Bermuda may refuse to enforce it to the extent that such performance would be illegal under the laws of, or contrary to public policy of, such other jurisdiction. DISCLOSURE This opinion is addressed to you in connection with the registration of the Warrants and the Warrant Shares with the SEC and is not to be made available to, or relied on by any other person or entity, or for any other purpose, without our prior written consent. We consent to the filing of this opinion as an exhibit to the Registration Statement of the Company. We also consent to the reference to our Firm under the captions "Foreign Issuer Considerations" and "Legal Matters" in the Registration Statement. This opinion is addressed to you solely for your benefit and is neither to be transmitted to any other person, nor relied upon by any other person or for any other purpose nor quoted or referred to in any public document nor filed with any governmental agency or person, without our prior written consent, except as may be required by law or regulatory authority. Further, this opinion speaks as of its date and is strictly limited to the matters stated herein and we assume no obligation to review or update this opinion if applicable laws or the existing facts or circumstances should change. This opinion is governed by and is to be construed in accordance with Bermuda law. Yours faithfully, APPLEBY, SPURLING & KEMPE 4 SCHEDULE 1. Certified copies of the Certificate of Incorporation, Memorandum of Association and Bye-Laws of the Company. 2. A certified copy of the "Foreign Exchange Letter," dated 15 January 1996 issued by the Bermuda Monetary Authority, Hamilton Bermuda in relation to the Company. 3. A certified copy of the "Tax Assurance", dated 20 February 1996, issued by the Registrar of Companies for the Minister of Finance in relation to the Company. EX-10.26.5 12 y54595a1ex10-26_5.txt AMEND. #3 TO LORAL SPACE 2000 STOCK OPTION PLAN EXHIBIT 10.26.5 AMENDMENT NO. 3 TO THE LORAL SPACE & COMMUNICATIONS LTD. 2000 STOCK OPTION PLAN This Amendment No. 3 (the "Amendment") to the Loral Space & Communications Ltd. 2000 Stock Option Plan (the "Plan") is made effective as of this 25th day of September, 2001. Pursuant to resolutions of the Board of Directors of Loral Space & Communications Ltd. (the "Company") dated September 25, 2001, the Plan is hereby amended as follows: 1. Section 3(a) of the Plan is hereby amended by increasing to 37,000,000 the number of shares of the Company's Common Stock, par value $0.01 per share, reserved for issuance under the Plan. Except as expressly provided herein, the terms and conditions of the Plan shall remain unchanged. LORAL SPACE & COMMUNICATIONS LTD. By: /s/ AVI KATZ ------------------------------------ Name: Avi Katz Title: Vice President and Secretary EX-23.3 13 y54595a1ex23-3.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.3 CONSENT OF DELOITTE & TOUCHE LLP We consent to the incorporation by reference in Amendment No. 1 to Registration Statement No. 333-73600 of Loral CyberStar, Inc. (a wholly owned subsidiary of Loral Space & Communications Ltd.) and Loral Space & Communications Ltd. (a Bermuda company) on Form S-4 of our reports with respect to the consolidated financial statements of Loral CyberStar, Inc. appearing in the Annual Report on Form 10-K of Loral CyberStar, Inc. for the year ended December 31, 2000 and the consolidated financial statements and consolidated financial statement schedule of Loral Space & Communications Ltd. appearing in the Annual Report on Form 10-K, as amended on Form 10-K/A, of Loral Space & Communications Ltd. for the year ended December 31, 2000 and to the reference to us under the heading "Experts" in the prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP San Jose, California November 20, 2001 EX-23.4 14 y54595a1ex23-4.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.4 CONSENT OF DELOITTE & TOUCHE LLP We consent to the incorporation by reference in Amendment No. 1 to Registration Statement No. 333-73600 of Loral CyberStar, Inc. (a wholly owned subsidiary of Loral Space & Communications Corporation Ltd.) and Loral Space & Communications Ltd. (a Bermuda company) on Form S-4 of our report with respect to the consolidated financial statements of Globalstar, L.P. for the years ended December 31, 2000, 1999 and 1998, appearing in the Annual Report on Form 10-K/A of Loral Space & Communications Ltd. for the year ended December 31, 2000 and to the reference to us under the heading "Experts" in the prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP San Jose, California November 20, 2001 EX-23.5 15 y54595a1ex23-5.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.5 CONSENT OF DELOITTE & TOUCHE LLP We consent to the use in Amendment No. 1 to Registration Statement No. 333-73600 of Loral CyberStar, Inc. (a wholly owned subsidiary of Loral Space & Communications Ltd.) and Loral Space & Communications Ltd. (a Bermuda company) on Form S-4 of our report with respect to the financial statements of Loral Asia Pacific Satellite (HK) Limited as of December 31, 2000 and 1999 and for the year ended December 31, 2000 and the period from August 6, 1999 (inception) to December 31, 1999, appearing in the prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in the prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP San Jose, California November 20, 2001 EX-99.1 16 y54595a1ex99-1.txt FORM OF CONSENT AND LETTER OF TRANSMITTAL EXHIBIT 99.1 CONSENT AND LETTER OF TRANSMITTAL LORAL CYBERSTAR, INC. OFFER TO EXCHANGE LORAL CYBERSTAR'S 10% SENIOR NOTES DUE 2006 GUARANTEED BY LORAL SPACE & COMMUNICATIONS LTD. AND WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF LORAL SPACE & COMMUNICATIONS LTD. FOR LORAL CYBERSTAR'S OUTSTANDING 11 1/4% SENIOR NOTES DUE 2007 AND 12 1/2% SENIOR DISCOUNT NOTES DUE 2007 PURSUANT TO THE PROSPECTUS AND CONSENT SOLICITATION DATED NOVEMBER , 2001 THIS CONSENT AND LETTER OF TRANSMITTAL IS BEING USED WITH RESPECT TO THE FOLLOWING SERIES OF OUTSTANDING DEBT SECURITIES (THE "EXISTING NOTES") OF LORAL CYBERSTAR, INC., A DELAWARE CORPORATION ("LORAL CYBERSTAR"). CHECK ONLY ONE.*
CUSIP NO. TITLE OF SECURITY --------- ----------------- [ ] 68628KAC8 11 1/4% Senior Notes due 2007 [ ] 68628KAD6 12 1/2% Senior Discount Notes due 2007
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, DECEMBER 20, 2001 UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE. EXCHANGE AGENT: BANKERS TRUST COMPANY By Mail: By Facsimile Transmission: By Overnight Carrier: BT Services Tennessee, Inc. (615) 835-3701 BT Services Tennessee, Inc. Reorganization Unit (For Eligible Institutions Only) Reorganization Unit P.O. Box 292737 Confirm by Telephone: 648 Grassmere Park Rd. Nashville, TN 37229-2737 (800) 735-7777 Nashville, TN 37211
BY TENDERING YOUR EXISTING NOTES IN THE EXCHANGE OFFER, YOU WILL ALSO BE CONSENTING TO CERTAIN PROPOSED AMENDMENTS TO THE INDENTURES UNDER WHICH THE EXISTING NOTES WERE ISSUED. DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. - --------------- * If more than one series of existing notes is being tendered, it is necessary to return a separate form in respect of each series. Please check the appropriate box at the top of this page to indicate the series of existing notes to which this Letter of Transmittal relates. This Consent and Letter of Transmittal (this "Letter") is to be used to accept an Exchange Offer pursuant to the Prospectus and Consent Solicitation of Loral CyberStar Company, dated November , 2001 (the "Prospectus"). The undersigned acknowledges that the undersigned has received and reviewed the Prospectus and Consent Solicitation dated November , 2001 and this Letter, which together constitute the solicitation of your consent to amend the indentures governing the Existing Notes as more fully described in the Prospectus and the Consent Solicitation and the offer (the "Exchange Offer") to exchange up to $675 million aggregate principal amount of newly issued debt securities (the "New Notes") of Loral CyberStar, guaranteed by Loral Space & Communications Ltd. ("Loral Space") and Loral CyberStar's existing and future restricted subsidiaries, and up to 6,657,096 warrants to purchase common stock of Loral Space (collectively, the "Exchange Consideration") for any and all of the $912.5 million aggregate principal amount of the Existing Notes. This Letter is to be used either if certificates for the Existing Notes are to be forwarded herewith or if delivery of the Existing Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company, pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering" in the Prospectus. Delivery of this Letter and any other required documents should be made to the Exchange Agent. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. The undersigned has completed, executed and delivered this Letter to indicate the action he or she desires to take with respect to the Exchange Offers. All holders of Existing Notes who wish to tender their Existing Notes must, prior to the Expiration Date: (1) complete, sign, date and mail or otherwise deliver this Letter to the Exchange Agent, in person or to the address set forth above; and (2) tender his or her Existing Notes or, if a tender of Existing Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility"), confirm such book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance with the procedures for tendering described in the Instructions to this Letter. Holders of Existing Notes whose certificates are not immediately available, or who are unable to deliver their certificates or Book-Entry Confirmation and all other documents required by this Letter to be delivered to the Exchange Agent on or prior to the Expiration Date, must tender their Existing Notes according to the guaranteed delivery procedures set forth under "The Exchange Offer -- Guaranteed Delivery Procedure" in the Prospectus. (See Instruction 1). The Instructions included with this Letter must be followed in their entirety. Questions and requests for assistance or for additional copies of the Prospectus or this Letter may be directed to the Information Agent, Morrow & Co., Inc., by calling (800) 607-0088. International noteholders should call (212) 754-8000 collect. Banks and brokerage firms should call (800) 654-2468. List in Box 1 below the Existing Notes of which you are the holder. If the space provided in Box 1 is inadequate, list the certificate numbers and principal amount of Existing Notes on a separate SIGNED schedule and affix that schedule to this Letter. 2 BOX 1 TO BE COMPLETED BY ALL TENDERING HOLDERS
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF ORIGINAL SECURITIES TENDERED AND IN RESPECT OF WHICH CONSENT IS GIVEN - ------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE PRINCIPAL AMOUNT OF EXISTING NOTES (PLEASE FILL IN IF BLANK) NUMBER(S)(1) OF EXISTING NOTES TENDERED(2) - ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Totals: - ------------------------------------------------------------------------------------------------------------------------ (1) Need not be completed if Existing Notes are being tendered by book-entry transfer. (2) Unless otherwise indicated, the entire principal amount of Existing Notes represented by a certificate or Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered. - ------------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ----------------------------------------------------------------------------- Account Number: ----------------------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ----------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ------------------------------------------------------------------- If delivered by book-entry transfer: ----------------------------------------------------------------------------- Name of eligible institution that Guaranteed Delivery: ------------------------------------------------------------------- Account Number: ----------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO Name: ----------------------------------------------------------------------------- Address: ----------------------------------------------------------------------------- 3 PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE INSTRUCTIONS, CAREFULLY Ladies and Gentlemen: The undersigned hereby consents (the "Consent") to the proposed amendments (the "Proposed Amendments") to the indentures dated as of January 31, 1997 between Loral CyberStar and Bankers Trust Company, as trustee (the "Trustee"), as described in the Prospectus, with respect to the Existing Notes, and hereby tenders to Loral CyberStar, the principal amount of Existing Notes indicated in the table above entitled "Description of Original Securities Tendered and in Respect of Which Consent is Given," upon the terms and subject to the conditions set forth in the Prospectus (receipt of which is hereby acknowledged) and in this Letter. These terms and conditions together constitute (1) Loral CyberStar and Loral Space's offers to exchange (the "Exchange Offers") newly issued securities for the applicable series of Existing Notes, as described in the Prospectus, properly tendered and accepted for exchange, and (2) Loral CyberStar and Loral Space's solicitation of Consents to the Proposed Amendments (the "Consent Solicitation"). The undersigned hereby agrees and acknowledges that, by the execution and delivery hereof, the undersigned delivers the written Consent to the Proposed Amendments with respect to the principal amount of Original Securities indicated in the table above entitled "Description of Original Securities Tendered and in Respect of Which Consent is Given." The undersigned understands that the Consent delivered hereby shall remain in full force and effect unless and until such Consent is revoked in accordance with the procedures set forth in the Prospectus and this Letter. The undersigned understands that Loral CyberStar and Loral Space elect to provide a subsequent offering period of three to 20 business days after the initial offering period has expired, no Consents may be revoked. To amend the indentures, Loral CyberStar must receive Consents from the registered holders of at least a majority in aggregate principal amount of all outstanding debt securities issued under the indentures, voting as a single class (the "Required Consents"). The undersigned understands that the Proposed Amendments will not become operative unless and until Loral CyberStar accepts for exchange or purchase debt securities issued under the indentures that represent at least the Required Consents. Upon the terms and subject to the conditions of the Exchange Offer, the undersigned tenders to Loral CyberStar the aggregate principal amount of Existing Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Existing Notes tendered with this Letter, the undersigned exchanges, assigns and transfers to, or upon the order of, Loral CyberStar all right, title and interest in and to the Existing Notes tendered. If the undersigned is not a broker-dealer, the undersigned represents that (i) the Exchange Consideration acquired pursuant to the Exchange Offer is being obtained in the ordinary course of business of the person receiving such Exchange Consideration, whether or not such person is the holder, (ii) such holder or such other person has no arrangement or understanding with any person to participate in the distribution of such Consideration within the meaning of the Securities Act of 1933 (the "Securities Act") and is not participating in, and does not intend to participate in, the distribution of such Exchange Consideration within the meaning of the Securities Act, and (iii) such holder or such other person is not an "affiliate," as defined in Rule 405 under the Securities Act, of Loral CyberStar or, if such holder or such other person is an affiliate, such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the undersigned is a broker-dealer which will receive Exchange Consideration for its own account in exchange for Existing Notes that were acquired as a result of market-making activities or other trading activities, it may be deemed to be an "underwriter" within the meaning of the Securities Act and it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale, offer to resell or other transfer of such Exchange Consideration; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned constitutes and appoints the Exchange Agent as his or her agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of Loral CyberStar) with respect to the tendered Existing Notes, with full power of substitution, to: (a) deliver certificates for such Existing Notes; (b) deliver Existing Notes and all accompanying evidence of transfer and authenticity to or upon the order of Loral CyberStar upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes to which the undersigned is entitled upon the 4 acceptance by Loral CyberStar of the Existing Notes tendered under the Exchange Offer; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of the Existing Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. If the undersigned is not the registered holder of the Existing Notes listed in the box above labeled "Description of Original Securities Tendered and in Respect of Which Consent is Given," or such holder's legal representative or attorney-in-fact, then in order to validly consent, the undersigned will have to obtain a properly completed irrevocable proxy that authorizes the undersigned (or the undersigned's legal representative or attorney-in-fact) to deliver Consents in respect of such Existing Notes on behalf of the holder thereof, and such proxy will have to be delivered with this Letter. The undersigned understands that tenders of Existing Notes may be withdrawn, and Consents may be revoked, at any time prior to the expiration of the Exchange Offer, unless Loral CyberStar and Loral Space elect to provide a subsequent offering period of three to 20 business days after the initial offering period has expired, during which no Consent may be withdrawn. A valid withdrawal of tendered Existing Notes will constitute the concurrent valid revocation of such holder's related Consents in respect of such Existing Notes. In order for a holder to revoke a Consent, such holder must withdraw the related tendered Existing Notes. In the event of a termination of the Exchange Offers, the Existing Notes tendered pursuant to the Exchange Offers will be returned to the tendering holders promptly (or in the case of Existing Notes tendered by book-entry transfer, such Existing Notes will be credited to the account maintained at DTC from which such Existing Notes were delivered). If Loral CyberStar or Loral Space makes a material change in the terms of the Exchange Offers or the Consent Solicitation or the information concerning the Exchange Offers or the Consent Solicitation, Loral CyberStar and Loral Space will disseminate additional offer and solicitation materials and extend the Exchange Offers or, if applicable, the Consent Solicitation, if and to the extent required by law. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Existing Notes tendered hereby and that Loral CyberStar will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents deemed by Loral CyberStar or the Exchange Agent to be necessary or desirable to complete the assignment and transfer of the Existing Notes tendered. STATE INVESTOR SUITABILITY FOR RESIDENTS OF: ARIZONA ARKANSAS GEORGIA IDAHO ILLINOIS INDIANA KENTUCKY MINNESOTA NEW JERSEY NORTH DAKOTA OREGON PENNSYLVANIA TENNESSEE TEXAS UTAH WISCONSIN
If the undersigned is a resident of any of the above states and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the undersigned's state securities regulatory authority has qualified the offer and sale of the New Notes in the undersigned's state; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended. [ ] The undersigned is a bank, savings institution, trust company, insurance company, "investment company" (as defined under the Investment Company Act of 1940, as amended), pension or profit-sharing trust, financial institution or institutional buyer (in each case, as defined in the securities laws of the undersigned's state of residence). 5 FOR RESIDENTS OF CALIFORNIA: If the undersigned is a resident of CALIFORNIA and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the California Department of Corporations has qualified the sale of the New Notes in California; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a bank, savings and loan association, trust company, insurance company, investment company registered under the Investment Company Act of 1940, pension or profit-sharing trust (other than a pension or profit-sharing trust of the issuer, a self-employed individual retirement plan, or individual retirement account), in each case, within the meaning of Section 25102(i) of the California Corporate Securities Law of 1968. [ ] The undersigned is an organization described in Section 501(c)(3) of the Internal Revenue Code, as amended on December 29, 1981, which has total assets (including endowment, annuity and life income funds) of not less than $5,000,000 according to its most recent audited financial statements, as described in Rule 260.102.10(a) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968. [ ] The undersigned is a corporation which has a net worth on a consolidated basis according to its most recent audited financial statements of not less than $14,000,000, as described in Rule 260.102.10(b) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968. FOR RESIDENTS OF OHIO: If The undersigned is a resident of OHIO and you are tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the Ohio Commissioner of Securities has qualified the sale of the New Notes in Ohio; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended. [ ] The undersigned is a corporation, bank, insurance company, any corporation, bank, insurance company, pension fund or profit fund, employees' profit-sharing trust, any association engaged (as a substantial part of its business or operations) in purchasing or holding securities or any trust in respect of which a bank is trustee or co-trustee (in each case, as defined in Ohio Securities Act). FOR RESIDENTS OF MICHIGAN: If the undersigned is a resident of MICHIGAN and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the Michigan Commissioner of Securities has qualified the sale of the New Notes in Michigan; or (2) the undersigned has checked the following box: [ ] The undersigned is a bank, savings institution, trust company, insurance company, investment company (as defined in the Investment Company Act of 1940, as amended) the federal national mortgage association, the federal home loan mortgage corporation, the government national mortgage association, a pension or profit-sharing trust the assets of which are managed by an institutional manager, the treasurer of the State of Michigan, an other financial institution, a broker-dealer (whether the purchaser is acting for itself or in some fiduciary capacity), or a lender approved by the federal housing administration and who has satisfied any additional requirements established by the administrator by rule or order. 6 THE FOLLOWING REPRESENTATIONS SHALL BE DEEMED TO BE MADE BY DTC PARTICIPANTS TENDERING AS INSTRUCTED BY BENEFICIAL HOLDERS OF EXISTING NOTES: REPRESENTATION RELATING TO BENEFICIAL HOLDERS RESIDENT IN THE FOLLOWING STATES: ARIZONA ARKANSAS GEORGIA IDAHO ILLINOIS INDIANA KENTUCKY MINNESOTA NEW JERSEY NORTH DAKOTA OREGON PENNSYLVANIA TENNESSEE TEXAS UTAH WISCONSIN
If the undersigned is tendering any Existing Notes on behalf of beneficial holders who are residents of any of the above states, the undersigned hereby represents and warrants with respect to each beneficial holder on whose behalf it is tendering Existing Notes that either (1) Loral CyberStar has notified the undersigned IN WRITING that Loral CyberStar will accept tenders of Existing Notes from all holders in such beneficial holder's state of residence; or (2) such beneficial holder has represented to the undersigned in its instruction to the undersigned that: - it is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended; or - it is a bank, savings institution, trust company, insurance company, "investment company" (as defined under the Investment Company Act of 1940, as amended), pension or profit-sharing trust, financial institution or institutional buyer (in each case, as defined in the laws of my state of residence). REPRESENTATION RELATING TO BENEFICIAL HOLDERS RESIDENT IN CALIFORNIA: If the undersigned is tendering any Existing Notes on behalf of beneficial holders who are resident in CALIFORNIA, the undersigned hereby represents and warrants with respect to each beneficial holder on whose behalf it is tendering Existing Notes that either (1) Loral CyberStar has notified the undersigned IN WRITING that Loral CyberStar will accept tenders of Existing Notes from all holders in California; or (2) such beneficial holder has represented to the undersigned in its instruction to the undersigned that: - it is a bank, savings and loan association, trust company, insurance company, investment company registered under the Investment Company Act of 1940, pension or profit-sharing trust (other than a pension or profit-sharing trust of the issuer, a self-employed individual retirement plan, or individual retirement account), in each case, within the meaning of Section 25102(i) of the California Corporate Securities Law of 1968; - it is an organization described in Section 501(c)(3) of the Internal Revenue Code, as amended on December 29, 1981, which has total assets (including endowment, annuity and life income funds) of not less than $5,000,000 according to its most recent audited financial statements, as described in Rule 260.102.10(a) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968; or - it is a corporation which has a net worth on a consolidated basis according to its most recent audited financial statements of not less than $14,000,000, as described in Rule 260.102.10(b) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968. [ ] The undersigned has read the above representation and represents and warrants that it is true and correct. REPRESENTATION RELATING TO BENEFICIAL HOLDERS RESIDENT IN OHIO: If the undersigned is tendering any Existing Notes on behalf of beneficial holders who are resident in OHIO, the undersigned hereby represents and warrants with respect to each beneficial holder on whose behalf it is tendering Existing Notes that either (1) Loral CyberStar has notified the undersigned IN WRITING that Loral CyberStar will 7 accept tenders of Existing Notes from all holders in Ohio; or (2) such beneficial holder has represented to the undersigned in its instruction to the undersigned that: - It is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended; or - It is a corporation, bank, insurance company, any corporation, bank, insurance company, pension fund or profit fund, employees' profit-sharing trust, any association engaged (as a substantial part of its business or operations) in purchasing or holding securities or any trust in respect of which a bank is trustee or cotrustee (in each case, as defined in Ohio Securities Act). REPRESENTATION RELATING TO BENEFICIAL HOLDERS RESIDENT IN MICHIGAN: If the undersigned is tendering any Existing Notes on behalf of beneficial holders who are resident in MICHIGAN, the undersigned hereby represents and warrants with respect to each beneficial holder on whose behalf it is tendering Existing Notes that either (1) Loral CyberStar has notified the undersigned IN WRITING that Loral CyberStar will accept tenders of Existing Notes from all holders in Michigan; or (2) such beneficial holder has represented to the undersigned in its instruction to the undersigned that: - It is a bank, savings institution, trust company, insurance company, investment company (as defined in the Investment Company Act of 1940, as amended) the federal national mortgage association, the federal home loan mortgage corporation, the government national mortgage association, a pension or profit-sharing trust the assets of which are managed by an institutional manager, the treasurer of the State of Michigan, an other financial institution, a broker-dealer (whether the purchaser is acting for itself or in some fiduciary capacity), or a lender approved by the federal housing administration and who has satisfied any additional requirements established by the administrator by rule or order. The undersigned understands that tenders of the Existing Notes pursuant to any one of the procedures described under "The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Loral CyberStar in accordance with the terms and subject to the conditions of the Exchange Offer. All authority conferred or agreed to be conferred by this Letter shall survive the death or incapacity of the undersigned, and every obligation of the undersigned under this Letter shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. Tenders may be withdrawn only in accordance with the procedures set forth in the Instructions contained in this Letter. Unless otherwise indicated under "Special Delivery Instructions" below, the Exchange Agent will deliver New Notes (and, if applicable, a certificate for any Existing Notes not tendered but represented by a certificate also encompassing Existing Notes which are tendered) to the undersigned at the address set forth in Box 1. The undersigned acknowledges that the Exchange Offers are subject to the more detailed terms set forth in the Prospectus and, in case of any conflict between the terms of the Prospectus and this Letter, the Prospectus shall prevail. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY 8 BOX 2 PLEASE SIGN HERE WHETHER OR NOT EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY X ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- (DATE) SIGNATURE(S) OF OWNER(S) ------------------------------------------------------- X OR AUTHORIZED SIGNATORY (DATE)
Area Code and Telephone Number: - -------------------------------------------------------------------------------- This box must be signed by registered holder(s) of Existing Notes as their name(s) appear(s) on certificate(s) for Existing Notes, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Letter. If the signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. (See Instruction 3) Name(s): - -------------------------------------------------------------------------------- ------------------------------------------------------------------------ (PLEASE TYPE OR PRINT) Capacity: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- ------------------------------------------------------------------------- (INCLUDE ZIP CODE) Signature(s) Guaranteed by an Eligible Institution: ------------------------------------------------------------ (If required by (AUTHORIZED SIGNATURE) Instruction 3) ------------------------------------------------------------ (TITLE) ------------------------------------------------------------ (DATE) (NAME OF FIRM)
9 BOX 3 TO BE COMPLETED BY ALL TENDERING HOLDERS - -------------------------------------------------------------------------------- PAYOR'S NAME: BANKERS TRUST COMPANY ------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE ----------------------------------- PAYOR'S REQUEST FOR TAXPAYER SOCIAL SECURITY NUMBER OR IDENTIFICATION NUMBER (TIN) EMPLOYER IDENTIFICATION NUMBER ------------------------------------------------------------------------------------------------------ PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE INSTRUCTION 5) ------------------------------------------------------------------------------------------------------ PART 3 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me), (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest dividends or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. Person (including a U.S. resident alien). SIGNATURE DATE ------------------------------------------------------------------------------------------------------ PART 4-CHECK IF AWAITING TIN [ ] ------------------------------------------------------------------------------------------------------
CERTIFICATION-UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM, INCLUDING THE TAXPAYER IDENTIFICATION NUMBER, IS TRUE, CORRECT AND COMPLETE. SIGNATURE ------------------------- DATE ----------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and that I mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office (or I intend to mail or deliver an application in the near future). I understand that if I do not provide a taxpayer identification number to the Payor within 60 days, the Payor is required to withhold 31 percent of all cash payments made to me thereafter until I provide a number. - --------------------------------------------------- --------------------------------------- SIGNATURE DATE
10 BOX 4 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Existing Notes in a principal amount not exchanged, New Notes, or Loral Space Warrants are to be issued in the name of someone other than the person whose signature appears in Box 2, or if Existing Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue and deliver: (check appropriate boxes) [ ] Existing Notes not tendered [ ] New Notes [ ] Loral Space Warrants, to: Name - ------------------------------------------------- (PLEASE PRINT) Address - ----------------------------------------------- - --------------------------------------------------------- Please complete the Substitute Form W-9 at Box 3 Tax I.D. or Social Security Number: --------- BOX 5 SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Existing Notes in a principal amount not exchanged, New Notes or Loral Space Warrants, are to be sent to someone other than the person whose signature appears in Box 2 or to an address other than that shown in Box 1. Deliver: (check appropriate boxes) [ ] Existing Notes not tendered [ ] New Notes [ ] Loral Space Warrants, to: Name - ------------------------------------------------- (PLEASE PRINT) Address - ----------------------------------------------- - --------------------------------------------------------- IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE (IN EACH CASE, TOGETHER WITH THE CERTIFICATE(S) FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SUCH EXISTING NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. 11 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Existing Notes or a Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed copy of this Letter (or facsimile hereof) and any other documents required by this Letter, must be received by the Exchange Agent at its address set forth herein on or before the Expiration Date. The method of delivery of Existing Notes and this Letter and all other required documents to the Exchange Agent is at the election and risk of the tendering holder. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Existing Notes should be sent to Loral CyberStar. Holders whose Existing Notes are not immediately available, or who cannot deliver their Existing Notes, this Letter, or any other required documents to the Exchange Agent prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis may tender their Existing Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i) tender must be made through an Eligible Institution (as defined below); (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) (x) setting forth the name and address of the holder, the certificate number or numbers of the Existing Notes and the principal amount of Existing Notes tendered, (y) stating that the tender is being made thereby and (z) guaranteeing that, within five business days after the Expiration Date, this Letter (or facsimile hereof), together with the certificates representing the Existing Notes to be tendered in proper form for transfer and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter (or facsimile hereof), together with the certificates for all tendered Existing Notes or a Book-Entry Confirmation, as the case may be, as well as all other documents required by this Letter, must be received by the Exchange Agent within five business days after the Expiration Date, all as provided in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedure." All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Existing Notes will be determined by Loral CyberStar in its sole discretion, whose determination will be final and binding. Loral CyberStar reserves the absolute right to reject any or all tenders that are not in proper form or the acceptance of which, in the opinion of Loral CyberStar's counsel, would be unlawful. Loral CyberStar also reserves the absolute right to waive any irregularities or conditions of tender as to particular Existing Notes. All tendering holders, by execution of this Letter, waive any right to receive notice of acceptance of their Existing Notes. Neither Loral CyberStar, the Exchange Agent nor any other person shall be under any duty to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice. 2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of any Existing Note evidenced by a submitted certificate or by a Book-Entry Confirmation is tendered, the tendering holder must fill in the principal amount tendered in the fourth column of Box 1 above. All of the Existing Notes represented by a certificate or by a Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. A certificate for Existing Notes not tendered will be sent to the holder, unless otherwise provided in Box 5, as soon as practicable after the Expiration Date, in the event that less than the entire principal amount of Existing Notes represented by a submitted certificate is tendered (or, in the case of Existing Notes tendered by book-entry transfer, such non-exchanged Existing Notes will be credited to an account maintained by the holder with the Book-Entry Transfer Facility). Except as otherwise provided herein, tenders of Existing Notes may be withdrawn at any time prior to 12:00 midnight, New York City time, on the Expiration Date. To withdraw a tender of Existing Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 12:00 midnight, New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing Notes to be withdrawn (including the certificate number or numbers and principal amount of such Existing Notes), (iii) be signed by the Depositor in the same manner as the original signature on this Letter by which such Existing Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfers sufficient to permit the Trustee with respect to the Existing Notes to register the transfer of such Existing Notes into the name of the 12 Depositor withdrawing the tender and (iv) specify the name in which any such Existing Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) for such withdrawal notices will be determined by Loral CyberStar, whose determination shall be final and binding on all parties. Any Existing Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect hereto unless the Existing Notes so withdrawn are validly tendered. Any Existing Notes which have been tendered but which are not accepted for exchange will be returned to the holder hereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Existing Notes may be tendered by following one of the procedures described in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering" at any time prior to the Expiration Date. 3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder(s) of Existing Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificate(s) for such Existing Notes, without alteration, enlargement or any change whatsoever. If this letter is signed by a participant in DTC, the signature must correspond with the name as it appears on the security position listing as the holding of the Existing Notes. If any of the Existing Notes tendered hereby are owned by two or more joint owners, all owners must sign this Letter. If any tendered Existing Notes are held in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are names in which certificates are held. If this Letter is signed by the holder of record and (i) the entire principal amount of the holder's Existing Notes are tendered; and/or (ii) untendered Existing Notes, if any, are to be issued to the holder of record, then the holder of record need not endorse any certificates for tendered Existing Notes, nor provide a separate bond power. In any other case, the holder of record must transmit a separate bond power with this Letter. If this Letter or any certificate or assignment is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and proper evidence satisfactory to Loral CyberStar of their authority to so act must be submitted, unless waived by Loral CyberStar. Signatures on this Letter or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office of correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act 1934 (an "Eligible Institution") unless the Existing Notes are tendered (i) by a registered holder (or by a participant in DTC whose name appears on a security position listing as the owner) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter and the Exchange Consideration is being issued directly to such registered holder (or deposited into the participant's account at DTC) or (ii) for the account of an Eligible Institution. If Existing Notes are registered in the name of a person other than the signer of this Letter, the Existing Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by Loral CyberStar, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in Box 4 or 5, as applicable, the name and address to which the Exchange Consideration or certificates for Existing Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. If no such instructions are given, any Exchange Consideration will be issued in the name of, and delivered to, the name or address of the person signing this Letter and any Existing Notes not accepted for exchange will be returned to the name or address of the person signing this Letter. Holders tendering Existing Notes by book-entry transfer may request that Existing Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate. 5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder (other than a person exempt from this requirement as discussed below) whose tendered Existing Notes are accepted for exchange must provide the Exchange Agent (as payor) with his or her correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is his or her social security number. If the Exchange Agent is not provided with the 13 correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to the holder of the New Notes pursuant to the Exchange Offer may be subject to back-up withholding. (If withholding results in overpayment of taxes, a refund or credit may be obtained.) Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these back-up withholding and reporting requirements. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. Under federal income tax laws, payments that may be made by Loral CyberStar on account of the Exchange Consideration issued pursuant to the Exchange Offer may be subject to back-up withholding at a rate of 30.5% (or 30% for payments made during the calendar year 2002). In order to avoid being subject to back-up withholding, each tendering holder must provide the holder correct TIN by completing the "Substitute Form W-9" referred to above, certifying that the TIN provided is correct (or that the holder is awaiting a TIN) and that: (i) the holder has not been notified by the Internal Revenue Service that he or she is subject to back-up withholding as a result of failure to report all interest or dividends; or (ii) the Internal Revenue Service has notified the holder that the holder is no longer subject to back-up withholding; or (iii) certify in accordance with the Guidelines that such holder is exempt from back-up withholding. If the Existing Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 ("W-9 Guidelines") for information on which TIN to report. Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous back-up withholding, an exempt holder must enter its correct TIN in Part 1 of the Substitute Form W-9, write "Exempt" in Part 2 of such form, and sign and date the form. See the enclosed W-9 Guidelines for additional instructions. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8BEN, "Certificate of Foreign Status" signed under penalties of perjury attesting to such exempt status. Such forms may be obtained from the Payor. If you do not have a TIN, consult the W-9 Guidelines for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If you do not provide your TIN to the Payor within 60 days, back-up withholding will begin and continue until you furnish your TIN to the Payor. Note: Writing "Applied For" on the form means that you have already applied for a TIN or that you intend to apply for one in the near future. 6. AGREEMENT ON TAX REPORTING OF THE EXCHANGE OFFER. The tendering holder and Loral CyberStar agree that for federal income tax purposes, they will both treat a transaction effected pursuant to the Exchange Offer as an exchange under Section 1001 of the Internal Revenue Code of 1986, as amended, of Existing Notes issued by Loral CyberStar for New Notes of Loral CyberStar and Loral Space warrants. 7. TRANSFER TAXES. Loral CyberStar will pay all transfer taxes, if any, applicable to the transfer of Existing Notes to it or its order pursuant to the Exchange Offer. If, however, the Exchange Consideration or certificates for Existing Notes not exchanged are to be delivered to, or are to be issued in the name of, any person other than the record holder, or if tendered certificates are recorded in the name of any person other than the person signing this Letter, or if a transfer tax is imposed by any reason other than the transfer of Existing Notes to Loral CyberStar or its order pursuant to the Exchange Offer, then the amount of such transfer taxes (whether imposed on the record holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of taxes or exemption from taxes is not submitted with this Letter, the amount of transfer taxes will be billed directly to the tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter. 8. WAIVER OF CONDITIONS. Loral CyberStar reserves the absolute right to amend or waive any of the specified conditions in the Exchange Offer in the case of any Existing Notes tendered. 14 9. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Existing Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Exiting Notes for Exchange. Neither Loral CyberStar nor any other person is obligated to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice. 10. INADEQUATE SPACE. If the space provided herein is inadequate, the aggregate principal amount of Existing Notes being tendered and the certificate number or numbers (if available) should be listed on a separate schedule attached hereto and separately signed by all parties required to sign this Letter. 11. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose certificates for Existing Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above, for further instructions. This Letter and related documents cannot be processed until the Existing Notes have been replaced. 12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus or this Letter, may be directed to the Information Agent. IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED EXISTING NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. 15 EX-99.2 17 y54595a1ex99-2.txt FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY LORAL CYBERSTAR, INC. OFFER TO EXCHANGE LORAL CYBERSTAR'S 10% SENIOR NOTES DUE 2006 GUARANTEED BY LORAL SPACE & COMMUNICATIONS LTD. AND WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF LORAL SPACE & COMMUNICATIONS LTD. FOR LORAL CYBERSTAR'S OUTSTANDING 11 1/4% SENIOR NOTES DUE 2007 AND 12 1/2% SENIOR DISCOUNT NOTES DUE 2007 Registered holders of Loral CyberStar's Outstanding 11 1/4% Senior Notes Due 2007 and 12 1/2% Senior Discount Notes due 2007 (the "Existing Notes") who wish to tender their Existing Notes in exchange for 10% Senior Notes Due 2006 Guaranteed by Loral Space and Warrants to Purchase Shares of Common Stock of Loral Space, and whose Existing Notes are not immediately available or who cannot deliver their Existing Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Bankers Trust Company (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or letter to the Exchange Agent. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus. To: The Bankers Trust Company (the "Exchange Agent") By Mail: By Facsimile Transmission: By Overnight Carrier: BT Services Tennessee, Inc. (615) 835-3701 BT Services Tennessee, Inc. Reorganization Unit (For Eligible Institutions Only) Reorganization Unit P.O. Box 292737 Confirm by Telephone: 648 Grassmere Park Rd. Nashville, TN 37229-2737 (800) 735-7777 Nashville, TN 37211
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: The undersigned hereby tenders the principal amount of Existing Notes indicated below, upon the terms and subject to the conditions contained in the Prospectus and Consent Solicitation dated November , 2001 of Loral CyberStar, Inc. (the "Prospectus"), receipt of which is hereby acknowledged. Description of Securities Tendered Sign Here Principal Amount of Existing Notes Tendered --------------------------------------- Signature(s) ------------------------------------------ -------------------------------------------------------- Certificate Nos. (if available) Please Print the Following Information - ------------------------------------------ Name(s) (as it appears on the outstanding Existing Total Principal Amount Notes) Represented by Existing Notes ----------------------- -------------------------------------------------------- -------------------------------------------------------- Certificate(s) ----------------------------------------- Address ----------------------------------------------- -------------------------------------------------------- Account Number ------------------------------------- Area Code and Tel. No(s). --------------------------- -------------------------------------------------------- Dated: ------------, 2001
STATE INVESTOR SUITABILITY FOR RESIDENTS OF: ARIZONA ARKANSAS GEORGIA IDAHO ILLINOIS INDIANA KENTUCKY MINNESOTA NEW JERSEY NORTH DAKOTA OREGON PENNSYLVANIA TENNESSEE TEXAS UTAH WISCONSIN
If the undersigned is a resident of any of the above states and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the undersigned's state securities regulatory authority has qualified the offer and sale of the New Notes in the undersigned's state; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended. [ ] The undersigned is a bank, savings institution, trust company, insurance company, "investment company" (as defined under the Investment Company Act of 1940, as amended), pension or profit-sharing trust, financial institution or institutional buyer (in each case, as defined in the securities laws of the undersigned's state of residence). 2 FOR RESIDENTS OF CALIFORNIA: If the undersigned is a resident of CALIFORNIA and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the California Department of Corporations has qualified the sale of the New Notes in California; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a bank, savings and loan association, trust company, insurance company, investment company registered under the Investment Company Act of 1940, pension or profit-sharing trust (other than a pension or profit-sharing trust of the issuer, a self-employed individual retirement plan, or individual retirement account), in each case, within the meaning of Section 25102(i) of the California Corporate Securities Law of 1968. [ ] The undersigned is an organization described in Section 501(c)(3) of the Internal Revenue Code, as amended on December 29, 1981, which has total assets (including endowment, annuity and life income funds) of not less than $5,000,000 according to its most recent audited financial statements, as described in Rule 260.102.10(a) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968. [ ] The undersigned is a corporation which has a net worth on a consolidated basis according to its most recent audited financial statements of not less than $14,000,000, as described in Rule 260.102.10(b) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968. FOR RESIDENTS OF OHIO: If the undersigned is a resident of OHIO and you are tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the Ohio Commissioner of Securities has qualified the sale of the New Notes in Ohio; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended. [ ] The undersigned is a corporation, bank, insurance company, any corporation, bank, insurance company, pension fund or profit fund, employees' profit-sharing trust, any association engaged (as a substantial part of its business or operations) in purchasing or holding securities or any trust in respect of which a bank is trustee or co-trustee (in each case, as defined in Ohio Securities Act). FOR RESIDENTS OF MICHIGAN: If the undersigned is a resident of MICHIGAN and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the Michigan Commissioner of Securities has qualified the sale of the New Notes in Michigan; or (2) the undersigned has checked the following box: [ ] The undersigned is a bank, savings institution, trust company, insurance company, investment company (as defined in the Investment Company Act of 1940, as amended) the federal national mortgage association, the federal home loan mortgage corporation, the government national mortgage association, a pension or profit-sharing trust the assets of which are managed by an institutional manager, the treasurer of the State of Michigan, an other financial institution, a broker-dealer (whether the purchaser is acting for itself or in some fiduciary capacity), or a lender approved by the federal housing administration and who has satisfied any additional requirements established by the administrator by rule or order. 3 THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR A SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office, branch, agency or correspondent in the United States, hereby guarantees to deliver to the Exchange Agent at its address set forth above, the certificates representing the Existing Notes, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery. Name of Firm - -------------------------------------------------------------------------------- Authorized Signature - -------------------------------------------------------------------------------- Title - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Number and Street or P.O. Box - -------------------------------------------------------------------------------- City, State, Zip Code - -------------------------------------------------------------------------------- Area Code and Tel. No. - -------------------------------------------------------------------------------- Dated: __________, 2001 DO NOT SEND CERTIFICATES FOR EXISTING NOTES WITH THIS FORM. THEY SHOULD BE SENT TO THE EXCHANGE AGENT WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. 4 EX-99.3 18 y54595a1ex99-3.txt FORM OF LETTER TO CLIENTS EXHIBIT 99.3 LORAL CYBERSTAR, INC. OFFER TO EXCHANGE LORAL CYBERSTAR'S 10% SENIOR NOTES DUE 2006 GUARANTEED BY LORAL SPACE & COMMUNICATIONS LTD. AND WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF LORAL SPACE & COMMUNICATIONS LTD. FOR LORAL CYBERSTAR'S OUTSTANDING 11 1/4% SENIOR NOTES DUE 2007 AND 12 1/2% SENIOR DISCOUNT NOTES DUE 2007 To our Clients: Enclosed for your consideration is a Prospectus and Consent Solicitation, dated November , 2001 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") by Loral CyberStar, Inc., a Delaware corporation ("Loral CyberStar"), to exchange, upon the terms and subject to the conditions set forth in the Prospectus and in the Letter of Transmittal, up to $675 million aggregate principal amount of newly issued debt securities (the "New Notes") of Loral CyberStar, guaranteed by Loral Space & Communications Ltd., Bermuda company, and up to 6,657,096 warrants to purchase common stock of Loral Space for any and all of the $912.5 million aggregate principal amount of certain outstanding securities issued by Loral CyberStar (the "Existing Notes") described herein. In connection with the Exchange Offer, Loral CyberStar is soliciting consents to certain amendments to the indentures under which Loral CyberStar issued the Existing Notes (the "Proposed Amendments") that would eliminate the restrictions on Loral CyberStar's operations currently included in those indentures (the "Consent Solicitation"). If you tender your Existing Notes in the Exchange Offer, you will also be consenting to the Proposed Amendments. This material is being forwarded to you as the beneficial owner of Existing Notes carried by us for your account or benefit but not registered in your name. A tender of any Existing Notes may be made only by us as the registered holder and pursuant to your instructions. Therefore, Loral CyberStar urges beneficial owners of Existing Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if they wish to tender Existing Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all Existing Notes held by us for your account or benefit pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Existing Notes. PLEASE NOTE THAT IF YOU ARE A RESIDENT OF ANY OF THE JURISDICTIONS THAT ARE LISTED UNDER THE HEADING "INVESTOR SUITABILITY" IN THE INSTRUCTION ATTACHED HERETO, YOU WILL BE REQUIRED TO RESPOND TO QUESTIONS RELATING TO WHETHER YOU ARE ELIGIBLE TO RECEIVE THE NEW NOTES IN THE EXCHANGE OFFER. PLEASE CALL THE DEALER MANAGERS TO FIND OUT WHETHER YOUR STATE SECURITIES REGULATORY AUTHORITY HAS QUALIFIED THE SALE OF THE NEW NOTES IN YOUR STATE. YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER TO PERMIT US TO TENDER EXISTING NOTES ON YOUR BEHALF IN ACCORDANCE WITH THE PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 12:00 midnight, New York City time, on December 20, 2001, unless extended (the "Expiration Date"). Existing Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to 2:00 p.m., New York City time, on the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Existing Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section entitled "The Exchange Offer -- Conditions to the Exchange Offer." 3. The Exchange Offer will expire on the Expiration Date. 4. Any transfer taxes incident to the transfer of the Existing Notes from the tendering holder to Loral CyberStar will be paid by Loral CyberStar, except as provided in the Prospectus and the instructions to the Letter of Transmittal. 5. The tender of your Existing Notes in the Exchange Offer will also constitute your consent to the Proposed Amendments. 2 If you wish to have us tender any or all of your Existing Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. If you authorize the tender of your Existing Notes, all such Existing Notes will be tendered unless otherwise specified below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Existing Notes held by us and registered in our name for your account or benefit. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Loral CyberStar. THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF EXISTING NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED, PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. Box 1 [ ] Please tender ALL my Existing Notes held by you for my account or benefit. I have identified on a signed schedule attached hereto the principal amount of Existing Notes to be tendered if I wish to tender less than all of my Existing Notes. Box 2 [ ] Please tender LESS than all my Existing Notes. I wish to tender $ principal amount of Existing Notes. Box 3 [ ] Please do not tender any Existing Notes held by you for my account or benefit. STATE INVESTOR SUITABILITY FOR RESIDENTS OF: ARIZONA ARKANSAS GEORGIA IDAHO ILLINOIS INDIANA KENTUCKY MINNESOTA NEW JERSEY NORTH DAKOTA OREGON PENNSYLVANIA TENNESSEE TEXAS UTAH WISCONSIN
If the undersigned is a resident of any of the above states and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the undersigned's state securities regulatory authority has qualified the offer and sale of the New Notes in the undersigned's state; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended. [ ] The undersigned is a bank, savings institution, trust company, insurance company, "investment company" (as defined under the Investment Company Act of 1940, as amended), pension or profit-sharing trust, financial institution or institutional buyer (in each case, as defined in the securities laws of the undersigned's state of residence). 3 FOR RESIDENTS OF CALIFORNIA: If the undersigned is a resident of CALIFORNIA and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the California Department of Corporations has qualified the sale of the New Notes in California; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a bank, savings and loan association, trust company, insurance company, investment company registered under the Investment Company Act of 1940, pension or profit-sharing trust (other than a pension or profit-sharing trust of the issuer, a self-employed individual retirement plan, or individual retirement account), in each case, within the meaning of Section 25102(i) of the California Corporate Securities Law of 1968. [ ] The undersigned is an organization described in Section 501(c)(3) of the Internal Revenue Code, as amended on December 29, 1981, which has total assets (including endowment, annuity and life income funds) of not less than $5,000,000 according to its most recent audited financial statements, as described in Rule 260.102.10(a) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968. [ ] The undersigned is a corporation which has a net worth on a consolidated basis according to its most recent audited financial statements of not less than $14,000,000, as described in Rule 260.102.10(b) of the Blue Sky Regulations promulgated under the California Corporate Securities Law of 1968. FOR RESIDENTS OF OHIO: If The undersigned is a resident of OHIO and you are tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the Ohio Commissioner of Securities has qualified the sale of the New Notes in Ohio; or (2) the undersigned has checked one of the following boxes: [ ] The undersigned is a "Qualified Institutional Buyer", as defined in Rule 144A under the Securities Act of 1933, as amended. [ ] The undersigned is a corporation, bank, insurance company, any corporation, bank, insurance company, pension fund or profit fund, employees' profit-sharing trust, any association engaged (as a substantial part of its business or operations) in purchasing or holding securities or any trust in respect of which a bank is trustee or co-trustee (in each case, as defined in Ohio Securities Act). FOR RESIDENTS OF MICHIGAN: If the undersigned is a resident of MICHIGAN and the undersigned is tendering any Existing Notes, we have been instructed by Loral CyberStar not to accept the undersigned's instruction unless either (1) the Michigan Commissioner of Securities has qualified the sale of the New Notes in Michigan; or (2) the undersigned has checked the following box: [ ] The undersigned is a bank, savings institution, trust company, insurance company, investment company (as defined in the Investment Company Act of 1940, as amended) the federal national mortgage association, the federal home loan mortgage corporation, the government national mortgage association, a pension or profit-sharing trust the assets of which are managed by an institutional manager, the treasurer of the State of Michigan, an other financial institution, a broker-dealer (whether the purchaser is acting for itself or in some fiduciary capacity), or a lender approved by the federal housing administration and who has satisfied any additional requirements established by the administrator by rule or order. 4 Date: , 2001 Signature(s) Account No.: ----------------------------------------- - -------------------------------------------------------- Tax Identification Number or - -------------------------------------------------------- Social Security Number: ----------------------------- Please print name(s) here Address: ----------------------------------------------- - -------------------------------------------------------- Telephone Number: ---------------------------------- - --------------------------------------------------------
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN IN A SIGNED SCHEDULE ATTACHED HERETO, YOUR SIGNATURE(S) HEREON SHALL CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL OF YOUR EXISTING NOTES. 5 EX-99.4 19 y54595a1ex99-4.txt FORM OF LETTER BROKERS, DEALERS EXHIBIT 99.4 LORAL CYBERSTAR, INC. OFFER TO EXCHANGE LORAL CYBERSTAR'S 10% SENIOR NOTES DUE 2006 GUARANTEED BY LORAL SPACE & COMMUNICATIONS LTD. AND WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF LORAL SPACE & COMMUNICATIONS LTD. FOR LORAL CYBERSTAR'S OUTSTANDING 11 1/4% SENIOR NOTES DUE 2007 AND 12 1/2% SENIOR DISCOUNT NOTES DUE 2007 To: Securities Dealers, Commercial Banks, Trust Companies and Other Nominees: Enclosed for your consideration is a Prospectus and Consent Solicitation, dated November , 2001 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") by Loral CyberStar, Inc., a Delaware corporation ("Loral CyberStar"), to exchange, upon the terms and subject to the conditions set forth in the Prospectus and in the Letter of Transmittal, up to $675 million aggregate principal amount of newly issued debt securities (the "New Notes") of Loral CyberStar, guaranteed by Loral Space & Communications Ltd., a Bermuda company ("Loral Space"), and up to 6,657,096 warrants to purchase common stock of Loral Space for any and all of the $912.5 million aggregate principal amount of certain outstanding securities issued by Loral CyberStar (the "Existing Notes") described herein. In connection with the Exchange Offer, Loral CyberStar is soliciting consents ("Consents") to amendments to the indentures under which Loral CyberStar issued the Existing Notes (the "Proposed Amendments") that would eliminate the restrictions on Loral CyberStar's operations currently included in those indentures (the "Consent Solicitation"). A holder who tenders the Existing Notes in the Exchange Offer will also be consenting to the Proposed Amendments. We are asking you to contact your clients for whom you hold Existing Notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold Existing Notes registered in their own name. Neither Loral CyberStar nor Loral Space will pay any fees or commissions to any broker, dealer or other person in connection with the solicitation of tenders pursuant to the Exchange Offer. You will, however, be reimbursed by Loral CyberStar and Loral Space for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Loral CyberStar and Loral Space will pay all transfer taxes, if any, applicable to the tender of Existing Notes to it or its order, except as otherwise provided in the Prospectus and the Letter of Transmittal. Enclosed are copies of the following documents: 1. The Prospectus; 2. A Letter of Transmittal, including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9, for your use in connection with the tender of Existing Notes by record holders and for the information of your clients; 3. A form of letter that may be sent to your clients for whose accounts you hold Existing Notes registered in your name or the name of your nominee, with space provided for obtaining the clients' instructions with regard to the Exchange Offer; 4. A form of Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Existing Notes are not lost but not immediately available, or if the procedure for book-entry transfer cannot be completed on ot prior to the Expiration Date; and 5. A return envelope address to Bankers Trust Company, as Exchange Agent (the "Exchange Agent"). Your prompt action is requested. The Exchange Offer will expire at 12:00 midnight, New York City time, on December 20, 2001, unless extended (the "Expiration Date"). Existing Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to 12:00 midnight, New York City time, on the Expiration Date. DTC Participants will be able to execute tenders through the DTC Automated Tender Offer Program. Please refer to the section of the Prospectus entitled "The Exchange Offer -- Procedures for Tendering" for a description of the procedures which must be followed to tender the Existing Notes in the Exchange Offer. To tender Existing Notes, certificates for Existing Notes or a Book-Entry Confirmation, a duly executed and properly completed Letter of Transmittal or a facsimile thereof, and any other required documents, must be received by the Exchange Agent as provided in the Prospectus and the Letter of Transmittal. STATE SECURITIES LAWS NOTICE LIMITATIONS ON DELIVERY OF EXCHANGE OFFER MATERIALS The Exchange Offer is currently under review by a number of state securities regulatory authorities. Please delay your mailings of the Prospectus and related documents to your clients who are residents of the states listed below. Mailings of the Prospectus to residents of other states are not restricted. NOVEMBER 29, 2001: Unless you have received WRITTEN instructions from us to the contrary, you should delay mailings to clients in the following states so that no documents are DELIVERED to your clients until November 29, 2001: Alabama Maryland Nevada South Dakota Alaska Massachusetts New Mexico Virginia Delaware Missouri Puerto Rico Washington Kansas Montana Rhode Island West Virginia Maine Nebraska South Carolina Wyoming DECEMBER 6, 2001: Unless you have received WRITTEN instructions from us to the contrary, you should delay mailings to clients in the following states so that no documents are DELIVERED to your clients until December 6, 2001: Connecticut Oklahoma Iowa Vermont Mississippi New Hampshire North Carolina LIMITATIONS ON ACCEPTANCE OF INSTRUCTIONS Because of pending review of the exchange offer by securities regulatory authorities in a number of states, you may not accept instructions to tender Existing Notes into the exchange offer from any clients in any of the following states unless either (1) they have complied with the investor eligibility procedures set forth in their instruction to you or (2) we have notified you IN WRITING that you may accept all instructions to tender from persons residing in such state: Arizona Illinois New Jersey Tennessee Arkansas Indiana North Dakota Texas California Kentucky Ohio Utah Georgia Michigan Oregon Wisconsin Idaho Minnesota Pennsylvania We will not accept Existing Notes from any person who tenders such Existing Notes without complying with the above procedure, and we will not pay the exchange consideration to any such person. 2 Additional copies of the enclosed material may be obtained from Morrow & Co., Inc., the Information Agent, by calling (800) 607-0088. International noteholders should call (212) 754-8000 collect. Banks and brokerage firms should call (800) 654-2468. Yours truly, LORAL CYBERSTAR, INC. /s/ AVI KATZ --------------------------------------- Avi Katz Vice President and Secretary NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. 3 -----END PRIVACY-ENHANCED MESSAGE-----